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Steel sample of blockchain technology application -- China Baowu

Time : 28/08/2021 Author : 5z3i4g Click : + -
        2020 is "not very friendly" for Global trade. The superimposed impact of adverse factors such as the global economic downturn and anti globalization has continuously impacted the global supply chain, and the market uncertainty has risen sharply. In the face of changes, China has timely put forward the goal of driving internal circulation and external circulation, and integrating new infrastructure with old infrastructure. The 14th meeting of the central Deep Reform Commission proposed that it is necessary to follow the trend of the new round of scientific and technological revolution and industrial transformation, accelerate the integration of the new generation of information technology and manufacturing industry, and improve the development level of digitalization, networking and intelligence of the manufacturing industry. The new infrastructure development and the old infrastructure support undoubtedly put forward new requirements for the steel industry: externally, there are still risks such as unstable supply chain and fluctuation of RMB exchange rate; Internally, it is necessary to not only coordinate the traditional steel inventory, but also meet the needs of special-purpose steel such as electrical steel, iron tower steel and machine room steel.
        As a modern enterprise in the traditional industry, China Baowu iron and Steel Group Co., Ltd. (hereinafter referred to as "China Baowu") has turned pressure into power, sought innovation and change against the trend, and keenly captured the method of breaking the situation. The first cross-border blockchain letter of credit transaction of domestic iron and steel enterprises priced and settled in offshore RMB emerged. The whole transaction does not require any paper documents, and is based on the blockchain technology. It has significant effects in improving the efficiency of document circulation and capital turnover, stabilizing the import supply of iron ore, and avoiding data risks, and has attracted great attention in the market. Behind this landmark letter of credit, a platform named Kangtuo provides technical support.
        Standard Chartered Bank is not only the issuing party of L / C, but also the shareholder and one of the founding banks of Kangtuo project. The outbreak of black swan in the first half of the year further exacerbated the uncertainty of iron ore price trend. The volatile bulk market has brought great challenges to large raw material purchasers such as China Baowu. How to ensure timely and stable supply to the maximum extent and reduce the impact of market fluctuations on itself is particularly important for iron ore buyers such as China Baowu. Yuan Tao, director of China Baowu ore business, introduced that under the current management requirements of low iron ore inventory control and streamlined procurement personnel, improving efficiency is particularly important for ore import trade. Although the epidemic has affected the supply of iron ore to a certain extent, through close daily communication with suppliers and the blockchain letter of credit platform, the efficient trading of iron ore can be ensured, and the timely connection of business can be ensured, which helps to better ensure the normal supply of iron ore.
        The first paperless RMB settlement letter of credit for iron ore was issued against this background, trying to solve the pain point of highly relying on traditional paper documents, including realizing data sharing, reducing the probability of error and reducing the time of modification. It is reported that the traditional L / C settlement includes such links as application, L / C issuance, notice, document presentation, negotiation, document posting, reimbursement, and document review. It involves a large number of documents and complicated procedures, which is easy to lead to errors and rework. In addition, the traditional L / C settlement involves importers, notifying banks, exporters, negotiating banks and other institutions. These participants will generate their own data, forming a "data island". Traditional intermediate banks can only notify each "isolated island" separately, which leads to long transaction cycle and slow circulation, which seriously hinders the capital turnover of the trading parties, and invisibly aggravates the opportunity cost of trade.
        In contrast, blockchain letters of credit help to realize real-time update and real-time sharing of all parties' data, break the "data island", connect the data of different partners, and avoid errors in the transmission process. As a result, the data on the chain forms a self certification closed loop, abandoning the manual review process, and greatly improving the efficiency of cross-border trade. Carl Wegner, CEO of Cantor, for example, said that once the information needs to be updated in the paper letter of credit procedure, it must be updated level by level by importers, notifying banks, exporters and negotiating banks, and it will take at least 7 to 10 days to complete. Therefore, in the real transaction, there are many buyers who have to compromise the inconsistencies in the transaction in order to ensure that the goods can reach the ship, which is harmful to their own interests.
        In contrast, blockchain letters of credit can be modified within a few hours, ensuring timely shipment and payment settlement. High transparency also brings high certainty. Each participant in the supply chain can see information changes on the platform, so as to determine the time of the next operation. This allows each link to respond in time and advance faster. "It is more important to specify the time of payment than to collect payment faster. Because both parties must complete one transaction before proceeding to the next one, the more sufficient the planning is, the faster the goods can be transported, the more the goods are sold, the less the credit line is occupied, the more the number of transactions, and the more the turnover.
        ”Carl Wegner. Not only that, the blockchain technology can also form a record that is difficult to forge and tamper with each data on the chain. On the one hand, it allows enterprises to trace the qualifications of other enterprises on the industrial chain, so as to achieve the purpose of controlling product quality; On the other hand, it also makes it possible for regulators to fully understand transactions, quickly identify risks and realize "penetrating supervision". The trade risks of conventional L / C transactions still exist, and the real-time updated electronic L / C can help the transaction participants to find potential financial fraud to the maximum extent. Data fraud risk is more likely to occur when information is unequal, especially when it is difficult to track documents and do not know which document is the latest.
        ”Carl Wegner said. It can be predicted that China Baowu, as the first iron and steel enterprise in China to try the cross-border transaction of blockchain, is expected to use its experience as a template and fully replicate it to other enterprises in the industry. The adopted standards are also expected to be further transformed into industry standards, opening a new chapter for accelerating the transformation of cross-border trade procedures and upgrading the supply chain. Lu Jing, CO managing director of Standard Chartered's China enterprise, financial institution and commercial bank department, also believes that financial technology is bringing profound changes to the mode of enterprise operation and management. "The emergence of blockchain technology has brought earth shaking changes to the cross-border trade and payment field; the offshore RMB letter of credit enabled by blockchain has added new wings to the internationalization of RMB.
        Standard Chartered is pleased to join hands with China Baowu, the largest iron and Steel Group in China, and Kangtuo, the leading blockchain platform, to conduct such a new exploration. " New space for RMB internationalization?. It is worth noting that this year, China Baowu has successively completed RMB cross-border settlement with vale, BHP Billiton and Rio Tinto. Ji Chao, head of raw material procurement of China Baowu, said that China Baowu imports a huge amount of iron ore every year. Actively promoting the use of RMB for payment and settlement in iron ore transactions is not only a business need, but also in line with the development trend of RMB internationalization. It is worth exploring with upstream and downstream partners of the industrial chain ecosystem. However, Ji Chao also frankly said that in the cross-border trade of iron ore this year, RMB settlement is expected to account for only about 2%. Although a certain amount of normal settlement has been achieved with some suppliers, there is still a long way to go before large-scale normal settlement.
        Next, as a central enterprise and a leading enterprise in China's iron and steel industry, China Baowu will continue to make efforts to promote cross-border settlement of RMB with ecosphere partners, help improve the attractiveness and competitiveness of RMB as an international settlement currency, enhance the voice of Chinese enterprises in the international commodity market, and build a stable global procurement chain. Lu Jing also introduced that Standard Chartered Bank has a team dedicated to promoting the global application of RMB. It connects with central banks around the world and shares the latest RMB internationalization policies with them. At the same time, it promotes Chinese enterprises to use RMB more for investment and financing settlement overseas and improves the recognition of RMB in the global market.
        The collision between emerging technologies and traditional industries has ignited a different spark. Although this RMB settled blockchain letter of credit transaction is only the first test of the steel industry, it provides sufficient guiding value. It can be predicted that the landing and application of cutting-edge technology will become a compulsory course for modern enterprises, leading the industry to constantly coruscate new vitality. (the Standard Chartered Bank mentioned in this article covers Standard Chartered PLC and its subsidiaries.).
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