HSBC has completed a live interbank forfaiting transaction with Bank of Communications on the China Trade Finance Union (CTFU) blockchain platform, becoming the first foreign bank to perform this kind of transaction on the mainland China-based system.
Launched in August this year, the interbank blockchain-based trading platform is led by the China Banking Association (CBA), and counts the ‘big five’ Chinese banks – Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China, Bank of China, China Construction Bank and Bank of Communications – among its members.
The centrally controlled project aims to standardise the digitisation of interbank trade finance transaction information as a means to build a new trade finance ecosystem in China and beyond.
In this transaction, an unnamed Bank of Communications client selling paper products obtained an undertaking to pay in 180 days from its buyer’s bank. Bank of Communications purchased the payment obligation from its client. Then, using the CTFU platform, Bank of Communications sold the undertaking to HSBC China. The offer letter, confirmation letter and transfer of rights were all produced and transmitted digitally via the platform in a process that took a matter of a few hours, as opposed to the standard two to three days.
“HSBC is pleased to be the first foreign bank executing this live interbank forfaiting transaction on the CTFU platform,” says Mark Wang, CEO of HSBC China. “The platform empowers banks to digitise trade finance transactions through blockchain technology. This boosts the scale and efficiency of such transactions. Great cooperation between Chinese and foreign banks will serve to benefit businesses.”
Another efficiency gain in this transaction comes from the CTFU platform’s support for Chinese characters and image attachments. Chinese characters are widely used to record bank customers’ names and addresses in countries and areas including mainland China, Hong Kong, Taiwan, Macau, Singapore and Malaysia, and documents containing these must normally be translated in order to be transmitted via Swift MT799 messages, incurring both costs and delays. In this transaction, however, Chinese characters were inputted directly and sent out to the counterparty.
“The CTFU platform greatly improves the banking sector’s efficiency and ultimately supports real economy growth,” says Pan Guangwei, CEO of the CBA.
HSBC says that it now plans to carry out more transactions on the platform, which is now open for more banks – both foreign and Chinese – to join.