Zhejiang-province lender China Zheshang Bank (浙商银行) has made use of blockchain technology to help bring asset-backed commercial paper (ABCP) to the Chinese financial market.
On 5 June CZB successfully issued the “Lianxin 2020 Lianjie First Phase Asset-backed Commercial Paper” (链鑫2020年度联捷第一期资产支持商业票据).
The issue was worth 120 billion yuan (USD$16.93 billion) and is China’s first ABCP, as well as one of five ABCP trial projects launched by the National Association of Financial Market Institutional Investors (中国银行间市场交易商协会) (NAFMII).
ABCP are asset-securitisation products comprised of the accounts receivable and bills of one or multiple enterprises, that are used by companies for their short-term financing needs, and typically have maturities of between 90 and 270 days.
The Lianxin ABCP is for a period of six months with the option of rollover issuance. The product pools the assets of nine enterprises in sectors including industrial chemicals and smart city technology, over half of which were private companies.
China’s Government Work Report (政府工作报告) called for “innovative monetary policy instruments for directly reaching the real economy,” while the Chinese central bank and NAFMII have since both pushed for the development of asset securitisation products.
A NAFMII spokesperson said that the launch of ABCP in China marked an “organic integration of supply chain finance and SME financing,” that “increases the accessibility of financing for small and medium-sized enterprises that have difficulty with financing via direct debt issuance.”
According to CZB its ABCP makes use of an innovative design that “combines the use of blockchain technology with asset securitisation,” in order to “provide a greater number of upstream and downstream small and medium-sized enterprises with a direct channel to markets, helping to greatly increase the accessibility of business financing.”
CZB made blockchain technology the basis for its accounts receivable financing platform, which has enabled nearly 4000 of the bank’s enterprise clients to issue over 100,000 in “blockchain receivables.”
According to CZB the accounts receivable platform enables CZB clients to apply for liquidity support upon maturation of the initial phase of the ABCP, without the need for temporary financing.