Sinochem Energy High-Tech, a state-owned petrochemical giant in China, has rolled out a blockchain warehouse receipt platform. A report unveiled this news on October 16, noting that this move aims to address the rising cost of operations and trade financing. Reportedly, the surging demand for strict environmental and safety measures due to the COVID-19 pandemic has pushed the operational costs of China’s petrochemical trade up.
According to the report, the sudden increased demand for environmental and safety measures saw small enterprises struggle to meet the credit conditions set by financial lenders. This is because the lenders tightened lending on warehouse financing after the small businesses displayed ineffective risk control and failing to track transaction processes of bulk goods securely.
To address these challenges, Sinochem Energy High-Tech, the China Construction Bank Inner Mongolia Branch, and the Nanchu Group joined hands to apply blockchain technology in the logistics cycle of the country’s petrochemical sector.
Combining IoT and Blockchain technology
Reportedly, the aforementioned firms completed the first-ever digital warehouse receipt pledge financing transaction on September 27 through a system that blends the blockchain with the Internet of Things (IoT). The financing party in this deal was Beijing Longrunkaida PEC Products, one of northern China’s most-significant traders in the lubricant and base oil sector.
Per Sinochem, the first IoT and blockchain-powered transaction took less than a day to process the application for issuance of warehouse receipts and for the bank to appropriate the loan. Additionally, the firm noted the entire process cut costs by 40% compared to a deal completed by common trade finance services in the market.
The firm went on to note that this system helps tackle a variety of risks. These include fraudulent warehouse