The China National Clearing Center (CNCC), the Chinese central bank’s contracts and clearing arm are set to operate with three major banks to raise a blockchain-powered forfaiting trading platform – focused at increasing the effectiveness of export financing.
As announced by Sina news agency, the CNCC has closed a deal that also involves the China CITIC Bank, one of the nation’s largest lenders. China Minsheng Bank, which concentrates in financing small and medium-sized enterprises (SMEs), and the Bank of China, one of China’s “big four” state-owned commercial banks, are the other signatories.
The agreement will see the parties utilise a blockchain-powered financing trading solution developed by China CITIC Bank – and could cover the way for other banks in the country to follow suit.
The platform will create a path for banks to deal with digital letters of credit.
The parties proceeded that the blockchain-powered tool would also facilitate the sale of financing assets between banks, improve the efficiency of trade financing in the forfaiting sector and reduce the cost of corporate financing.
In the banking industry, forfaiting refers to a kind of financing that allows exporters to receive payment faster by selling receivables at discounted prices through third parties.
Banks as a rule act as underwriters in the process, acting as forfaiters.
Forfaiting is common among Chinese export firms – particularly in the SME sector. However, the process is often long, arduous, and paper-heavy, a factor that has led the banks to take action.
The banks announced that the solution has the potential to mature an “asset trading platform,” and said it could become a “one-stop-shop” for banks that engage in forfaiting-related business.