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Chinese Shipping Firm Eyes Blockchain for Supply Chain Financing

Blockchain could become a major player in trade, logistics and supply chain financing—areas where innovative decentralization adds value and isn’t simply the new kid on the tech block.

Because it’s an autonomous, distributed database, blockchain is naturally well suited to applications that bring together multiple parties—like buyers, sellers, banks and other actors in the complex trade and logistics landscape.

IBM famously partnered with shipping giant Maersk to launch a blockchain for ocean freight logistics in 2018. Now, Chinese outlet People’s Daily is reporting that China Shipbuilding Industry Complete Logistics signed a cooperation agreement with Shanghai Bank to create innovative supply chain services. Recently, Shanghai Bank has been the logistics firm’s go-to provider of credit services and supply chain financing. Last fall Shanghai Bank hosted a conference around the topic of supply chain finance and its potential to develop sustainable financial business plans; it also officially debuted Uplink e-Chain, a digital supply chain financial service web platform that offers deeper integration, wider coverage and higher efficiency for small and mid-size enterprises.

Now, the two parties will enter into a joint venture to build the China Ship-Shangyin online supply chain financing platform underpinned by blockchain technology.

A 2017 research paper led by professor Erik Hoffman, chair of logistics management for Switzerland’s University of St. Gallen, outlines the case for incorporating blockchain in supply chain financial ecosystems. “Participants are able to continuously monitor the detailed goods and transactions digitally,” the authors wrote, noting that trading partners benefit from blockchain’s “efficiency, transparency and autonomy.”

“Such an inclusive infrastructure relies on a shared ledger that provides any supply chain related information and ensures global authenticity and security for data and information at the same time,” the authors continued. “This significantly reduces the costs and complexity of today’s systems.”

In a blockchain-based system, suppliers could receive payment more quickly and keep supply chains running smoothly. Blockchain has seen documented success in trade financing and could play a pivotal role in enabling more sustainable, ethical supply chains.