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    Home > Block Chain Technology Enables Coal Trade

    Block Chain Technology Enables Coal Trade

    Echemi 2019-08-13

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    On July 23 - 24, the National Coal Trade Fair was held in the summer of 2019. Reporters found that both traditional large-scale state-owned enterprises and emerging coal trading institutions recommend their online trading platform as a key business, reflecting that the informationization and electronization of coal trading has become a recognized development direction in the industry. At the same time, the China Coal Trade Block Chain Standards Working Group (hereinafter referred to as the "National Standards Group") was formally established at the Forum on Coal Trade Market and Block Chain Development. In this regard, Feng Yu, vice president of China Coal Transport and Marketing Association, said: "The combination of production and finance is an important direction for the future development of the coal industry, and block chain technology can inject new vitality into coal trade. The establishment of the national standard group will help to improve the industry standards and promote the application of block chain technology in coal trade.

    On July 9, the Guidelines on Promoting the Entity Economy of Supply Chain Financial Services issued by the CBRC clearly pointed out that banks and insurance institutions should be encouraged to embed new technologies such as Internet of Things and block chains into the trading links to improve the level of intelligent wind control. Why does coal trade need block chain technology?

    "Coal supply chain has complex structure, high non-standard degree, many intermediate links and complex transport units, and the traditional offline paper documents information transfer mode has high trust cost." Zhou Xinsheng, executive vice president of Shanghai Coal Exchange, told reporters that the use of block chains as a means of information transmission, its unalterable Distributed Accounting method, can make information transmission more trustworthy advantages. Wu Wenxin, president of Aijian Trust, expressed similar views. He believes that, like other supply chain finance, the difficulty and high cost of financing for small and medium-sized enterprises in the coal industry chain has always been a pain point in the industry. Because banks rely on core enterprises, for the sake of wind control, banks are only willing to provide factoring business to core enterprises or advance payment to their downstream distributors, while more secondary and tertiary SMEs are unable to participate. At the same time, it is very difficult for many coal enterprises to confirm their receivables and face-to-face operation. Journalist noted that Sichuan Coal Group had defaulted on bonds eight times in three years, resulting in extremely difficult financing; and coal enterprises in Shanxi, the main coal-producing area, had continued to raise financing costs between 2015 and 2018, and the weighted average interest rate of bond financing was once nearly one percentage point higher than the national average level.

    "But the block chain and supply chain are the combination of heaven and earth, which can help coal enterprises understand the past and present life of each transaction, reduce the cost of trust, break the information island, solve the pain point of supply chain finance, and effectively reduce the financing cost of coal enterprises." Wu Wenxin said. 

    Zhou Xinsheng further introduced that in the current coal industry, each trading market and coal-using enterprises lack effective cooperation ties. The use of block chain technology can enable all parties to cooperate effectively, reduce the operating costs of the coal industry chain, and better realize the combination of production and finance, production and technology.

    Reporters have noticed that the first batch of members of the national standard group include the China Coal Transport and Marketing Association (the National Coal Trading Market Committee), the China Communications Industry Association Block Chain Committee and the Shanghai Coal Exchange, as well as the Shaanxi Coal Trading Center. Seven regional coal trading centers, as well as Aijian Trust and Qikun Science and Technology and other financial, block chain technology institutions. Gao Bin, deputy director of the Block Chain Committee of the Communication Industry Association of the Ministry of Industry and Information Technology, said frankly, "This year is the first year of the block chain industry, and the biggest bottleneck of the block chain at present is how to break through the industrial chain. Therefore, the establishment of the National Standard Group has a "milestone" significance, because it will truly realize the industrial application of block chain technology. According to Feng Yu, the application of block chain technology in coal trading has great potential. "There are about 4 billion tons of coal traded in the supply chain every year in China. Even if the block chain technology is applied to 10% of it, the market size can not be underestimated."

    But does this mean that block chain technology can be well applied to coal trade?

    An insider who did not want to be named told reporters that the coal industry has the characteristics of "acquaintance economy". How to break through the "acquaintance economy" restriction of coal, respect the financial attribute of coal as a commodity, and make the transaction more smoothly, besides technological innovation, it also needs a breakthrough in mechanism. Block chain technology is currently mainly used to reduce costs for stock customers and to enable more customers to gain the trust of financiers. Li Hongguo, chairman of Northeast Asia Coal Trading Center, believes that, in fact, at present, domestic trading centers are doing supply chain finance, and there are also "quasi-block chain" technologies. In order to form these "quasi-block chain" technologies into real "block chain" technology, each coal trading center should form a joint force and bring out some high-quality items as soon as possible. To achieve results and form a mature model.

    "Although we have reached a certain consensus on the application of block chain technology in coal trade, as the first crab eater, we still need to refine these consensus and land it as soon as possible." 

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