The Chinese government has allocated Rmb32.4mn (US$4.7mn) to the People’s Bank of China (PBOC) in “special funding” to further develop its Greater Bay Area trade finance blockchain platform over the next three years.

The funding will help drive the growth of the platform, which is the “most supported and highest-level blockchain project at the national level”, according to Global Times.

Led by PBOC’s digital currency research lab, the Bay Area Trade Finance Blockchain Platform (BATFB), was developed to provide smaller businesses with easier access to trade finance in the Guangdong, Hong Kong and Macau areas, as well as reduce trade friction between Hong Kong and Macau, as both regions are governed as special administrative areas with their own currencies and as such are subject to capital controls.

While little information has been revealed about the platform’s progress, Bank of China, China Construction Bank, China Merchants Bank and Ping An Bank were involved in discussions regarding the project in Shenzhen in May 2018. Standard Chartered was then invited to trial the platform in its September testing phase, making it the only foreign bank involved at this point – largely due to its presence in the Chinese market but also because of its ongoing trade finance business with the monetary authority in Hong Kong.

Standard Chartered was one of the 12 banks to launch Hong Kong’s trade finance blockchain platform, eTradeConnect, which aims to digitise open account transactions. Based on Hyperledger Fabric, the solution is built by OneConnect, the fintech arm of Chinese insurance firm Ping An Group, and run by Hong Kong Trade Finance Company, a unit set up by the Hong Kong Monetary Authority.

“The discussions we had in May with the PBOC in Shenzhen were primarily to brainstorm what we can develop to help the local market. This was a broader discussion around the overall development of the Greater Bay Area, which is also building steam. We said that one factor is to have a platform that facilitates clients, but ultimately what is the direction of the platform in facilitating domestic and international trade?” Biswajyoti Upadhyay, regional head of transaction banking product management for Greater China and North East Asia at Standard Chartered said at the time of the launch.

One year later, in December 2019, there were 38 banks participating in the promotion and application of the platform, with business volumes having exceeded Rmb87bn (US$12.4bn), according to a report by PBOC’s research lab published last month. It adds that the platform has now launched four businesses: supply chain account receivables multi-level financing, external payment tax filing forms, a fast track for rediscounts and international trade account supervision.

The report by PBOC’s research lab also reveals that the central bank has signed an agreement with Hong Kong’s trade platform: “By signing a memorandum of cooperation with the Hong Kong Monetary Authority’s trade linkage platform, the People’s Bank of China’s trade finance blockchain platform has opened up an international connection.”

The BATFB solution also ties in with China’s wider Greater Bay Area project. Unveiled in February 2019, it aims to connect Hong Kong, Macau and nine other cities in southern China (see figure 1).

Figure 1: Greater Bay Area

GBA has a population of 70 million, with an expected GDP of US$4.6trn by 2030. A report by HSBC notes that the GBA accounts for 12% of China’s GDP and 37% of the country’s total exports – if GBA were a country, it would be the world’s fourth-largest exporter, ahead of Japan. The region is home to several technology giants including global exporter Huawei (see figure 1).

Research published in September by Standard Chartered in its annual survey of manufacturers in the region found that “64% of respondents see the GBA presenting new business opportunities some years down the road”, a figure up from 49% the year before. It says this increase is likely due to the GBA plan being published, boosting awareness and lifting expectations. “We believe this optimism is based on the GBA’s size and uniqueness, and on GBA-related policies”, it adds.