On June 8, reports emerged that China Zheshang Bank, a national commercial bank, issued the country’s first asset-backed commercial paper, ABCP, worth about $16.93 billion on a blockchain. The paper was issued as a part of the National Association of Financial Market Institutional Investors’ (NAFMII) testing project for ABCPs.
By description, an asset-backed commercial paper is a short-term investment that is mainly issued by financial institutions; to assist companies in meeting some of their short-term goals. This project is known as “Lianxin 2020 Lianjie First Phase Asset-backed Commercial Paper”. Official reports indicate that the period of the Lianxin ABCP is six months; with a span of the next issuance yet to be specified.
An official working for the NAFMII said that the use of blockchain technology would give enterprises a:
“direct channel to markets, helping to greatly increase the accessibility of business financing.”
Boosting Small and Micro Enterprises
The small, medium and micro enterprises mostly encounter challenges with bond issuance since they have no connection with open markets. Hence, the launch of Lianxin ABCP will guarantee that SMEs can find secure financial support. An official said:
“increases the accessibility of financing for SMEs that have difficulty with financing via direct debt issuance.”
Moreover, it will integrate supply chain finance with the small, medium, micro-enterprises to support them.
China, Banks, and Blockchain
The People’s Bank of China (PBOC) and several other major banks are leading in the blockchain innovation and implementation of traditional finance. On May 13, PBOC’s deputy governor Fan Yifei said that China should accelerate its blockchain adoption strategy.
On May 14, reports emerged that the PBOC proposed a blockchain-based trade finance platform targeting the Guangdong-Hong Kong-Macao Greater Bay Area. Some weeks earlier in April, the Industrial and Commercial Bank of China published a white paper proposing blockchain applications in finance.