Blockchain to play a key role in financing China’s SMEs

Peer-to-peer lender Dianrong teams up with Foxconn to serve underfunded small businesses

PUBLISHED : Tuesday, 07 March, 2017, 5:30pm
UPDATED : Tuesday, 07 March, 2017, 10:20pm, one of China’s largest peer-to-peer (P2P) lending companies, has partnered with Taiwan’s Foxconn Technology Group to expand supply chain finance on the mainland.

The two firms said they would provide a way of serving the country’s 40 million underfunded small businesses.

Soul Htite, chief executive of Dianrong, said on Tuesday that the new platform, Chained Finance, aimed to revolutionise China’s finance sector, and is likely to create a new online marketplace based on blockchain, the technology behind the digital currency bitcoin.

“Blockchain is revolutionising the finance industry and offers seamless solutions to any company operating and financing complicated supply chains,” Htite, a co-founder of the American P2P company Lending Club, said in a statement.

In a written reply to queries from the South China Morning Post, Htite said he believed blockchain technology held the key to the successful operation of mainland banks as it helped them save costs, assess credibility and find suitable clients amid government reforms designed to expand financing services to small businesses and individuals.

The two companies wouldn’t disclose their targeted business volume, adding that they were discussing details with several potential investors in the platform.

Jacky Lee, chief executive of FnConn, a subsidiary of Foxconn, said that Chained Finance would target suppliers of all sizes.

Foxconn is the world’s largest assembler of electronic devices for Apple.

Founded by Htite and Chinese lawyer Kevin Guo Yuhang in 2012, Dianrong has been experimenting with using digitalisation to redraw the mainland’s financial landscape. Traditionally, a lot of small firms have had to pay lofty interest rates to secure funding through the shadow banking system.

In a previous interview with the Post, Htite said Dianrong focused on helping traditional banks to go digital by introducing the latest technologies to improve their efficiency and risk-control capabilities.

Soul Htite, the man who wants to shake up China’s banking system

Supply chain finance refers to credit given to the small- and medium-sized enterprises that act as suppliers to a large blue-chip buyer.

Blockchain is the distributed ledger technology behind the cryptocurrency bitcoin.

It records and stores every transaction or exchange of data that occurs in the network, eliminating the need for a central authority and providing greater transparency for regulatory reporting.

“Dianrong is renowned in the mainland’s financial technology (fintech) market for its cutting-edge technologies,” said Richard Zhu, an IT engineer at Zillion Fortune, a Shanghai-based financial services company. “Blockchain is a sophisticated technology, but it certainly has huge potential to grow in China.”

Analysts have said China will become a global leader in the implementation of blockchain in tandem with the its preparations to roll out advanced 5G mobile services in the telecommunication industry by 2020.

Htite said Chained Finance would provide firms in the supply chain with easier access to funding at “competitive rates.”

Dianrong plans to list on a stock market outside the mainland before the end of 2018, with Hong Kong being a primary listing venue.

It raised US$207 million in a series C funding rounds from investors, including Standard Chartered, in 2015.