China Zheshang Bank (CZB), based in Zhejiang province, has reportedly issued the country’s first asset-backed commercial paper (ABCP) using blockchain technology worth $16.93 billion (120 billion Yuan).
— China Banking News (@CBankingEditor) June 8, 2020
The CZB’s “Lianxin 2020 Lianjie First Phase Asset-backed Commercial Paper” has been issued as part of a pilot project by the National Association of Financial Market Institutional Investors’ (NAFMII) for ABCPs.
An ABCP is classed as a short-term investment vehicle issued by financial institutions to help businesses meet their short-term funding needs, normally for a period of between 3 to 9 months.
With the global economy destabilised, a number of commercial and central banks worldwide – including the Bank of England and the U.S. Federal Reserve – have looked to increase the role of commercial paper to support liquidity and bridge shortages in the financial system.
Several nationwide initiatives have come to light since China’s President Xi Jinping publicly announced support for blockchain technology last October.
NAFMII are the organisation tasked with enhancing market liquidity in the bond market and although they are a self-regulatory entity they commit to “…upholding the guiding principles of the Party Central Committee and the State Council, fully carries out the decisions and plans of the People’s Bank of China (PBC)…”
The China Zheshang Bank had already established a working relationship with the PBC after the central bank gave the go-ahead for development for a “…system of blockchain digital notes…” in 2016.
While the exact nature of the blockchain used for the CZB ABCP is not yet known, the assets of nine private and public companies, from a range of industry sectors such as industrial chemicals and smart city technology, have been included in the new issuance.
The initial term period for the CZB ABCP will be six months but with the option of rollover into a longer period. China Banking News report that the issuance will “…provide a greater number of upstream and downstream small and medium-sized enterprises with a direct channel to markets, helping to greatly increase the accessibility of business financing.”