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Chinese Banks Set to Adopt Blockchain-powered Forfaiting Platform

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The China National Clearing Center (CNCC), the Chinese central bank’s settlements and clearing arm, is set to work with three major banks to foster a blockchain-powered forfaiting trading platform – aimed at boosting the efficiency of export financing.

Source: Adobe/Maksym Yemelyanov

Per Sina, the CNCC has sealed a deal that also involves the China CITIC Bank, one of the nation’s biggest lenders. China Minsheng Bank, which specializes 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 deal will see the parties adopt a blockchain-powered forfaiting trading solution developed by China CITIC Bank – and could pave the way for other banks in the nation to follow suit.

The platform will pave the way for banks to deal with digital letters of credit.

The parties added that the blockchain-powered tool will also facilitate the sale of forfaiting assets between banks, improve the efficiency of trade financing in the forfaiting sector and reduce the cost of corporate financing.

In the banking world, forfaiting refers to a kind of financing that allows exporters to receive payment faster by selling receivables at discounted prices through third parties.

Banks typically act as guarantors 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 said that the solution has the power to become an “asset trading platform,” and said it could become a “one-stop-shop” for banks that engage in forfaiting-related business.