In order to resolutely implement the decisions and arrangements of the Central Committee of the Communist Party of China (CPC) and the State Council on taking solid steps to ensure stability on the six fronts (employment, financial sector, foreign trade, foreign investment, domestic investment and expectations) and comprehensively implementing the task of maintaining security in the six areas (the employment of residents, the basic livelihood of the people, operations of market entities, food and energy security, stable industrial and supply chains, and the normal functioning of primary-level governments), provide proper financial support for stabilizing businesses and securing employment, offer targeted services for the integrity and stability of supply chains and industrial chains, improve the overall operational efficiency, and facilitate the virtuous cycle and optimized planning of the economy, the following opinions are hereby put forward to regulate, develop and innovate supply chain finance (SCF):
I. Accurately grasping the implication and development orientation of SCF
1. Improving the operational efficiency of supply chains and industrial chains to reduce business costs. Based on the supply chains and industrial chains as a whole, SCF uses technology-based approaches to integrate the information about logistics, capital flow as well as information flow and, under real trading backgrounds, builds the financial supply system and risk assessment system which integrate core enterprises dominant in the supply chains with their upstream and downstream enterprises. It aims at providing systematic financial solutions which enable quick responses to settlement, financing, financial management and other comprehensive needs of enterprises in the industrial chains, so as to reduce business costs and raise the value of all parties concerned.
2. Supporting the stable upgrading of supply chains and industrial chains as well as the national strategic planning. SCF should proceed from and aim at serving the integrity and stability of supply chains and industrial chains, and speed up innovation and regulated development to keep in line with the changes of industrial organization models. It is expected to promote recovery, reconstruction, optimization and upgrading of industrial chains, to strengthen support for national strategic planning and key areas, and to give full play to the decisive role of the market in resource allocation so as to push forward economic restructuring.
3. Upholding the professional advantages and market positioning of market entities and enhancing coordination. Financial institutions, core enterprises, warehousing and logistics enterprises as well as technological platforms should focus on their main businesses, enhance sharing and cooperation based on their professional advantages and market positioning, and deepen information synergy and technological empowerment. Efforts should be made to develop more scenario- and ecology-based SCF, with more services provided through online and digital channels, and to secure that the industrial chains are characterized by transparent information, safe operation as well as stable production and sales, so as to bolster market competitiveness and extension capacity of the industrial chains.
4. Focusing on ensuring a fair and orderly market and a virtuous industrial cycle. Core enterprises should strictly comply with the Regulations on Ensuring Payments to Small and Medium-Sized Enterprises by making timely repayment to micro, small and medium-sized enterprises (MSMEs), expanding commercial credit in a reasonable and orderly way, protecting legitimate rights and interests of MSMEs, and shaping an industrial ecology where micro, small, medium-sized and large enterprises exist and prosper together.
II. Making steady progress in regulating, developing and innovating SCF
5. Upgrading the overall financial services for the industrial chains. Financial institutions, core enterprises, government bodies and professional third-party institutions should be encouraged to strengthen information sharing. Backed by core enterprises, a digital and intelligent system of information, credit assessment and risk management, which integrates upstream and downstream enterprises, should be established to dynamically track the operations of MSMEs and to cultivate a steadier and closer relationship between financial institutions and enterprises. Financial institutions such as banks should be encouraged to provide integrated solutions for the industrial chains, including settlement, financing and financial management, so as to improve the integrity and synergy of financial services. (Responsibilities of the PBC, CBIRC and SASAC)
6. Making Explorations to provide better financing and settlement services for supply chains through online and digital channels. When the trading information is clearly visible in a supply chain, and cash flow and risks are under control, banks may conduct online ex-ante, interim and ex-post examination for lending via pilot programs of financing upstream enterprises in the supply chain. The use of e-signature should be encouraged in signing contracts online, conducting identity authentication and verification, as well as verification for distant video contract signing. E-authentication should be encouraged to be mutually recognized among banks. (Responsibilities of the PBC and CBIRC)
7. Enhancing support for core enterprises. With risks effectively under control, credit, bond and other tools should be comprehensively utilized to encourage core enterprises to improve their financing capability and liquidity management, ensuring a smooth and stable industrial chain in the upstream and downstream. Core enterprises should be encouraged to issue bonds for the payment to upstream and downstream enterprises, so as to play their role as funding support for the industrial chains. For enterprises in nationally strategic and key areas, such as advanced manufacturing, modern service industries and high-quality trade development, financial institutions like banks, as well as bond regulators, may set up green channels to ensure timely response to their financing needs. (Responsibilities of the PBC and CBIRC)
8. Promoting the standardization and transparency of receivables. Financial institutions should be encouraged to connect to supply chain bill platforms recognized by the PBC, and support core enterprises to issue supply chain bills. Banks should be encouraged to provide more convenient financing instruments such as discount and pledge for supply chain bills and support MSMEs to raise funds through standardized bills in the bond market, thus raising the efficiency of issuance, circulation and financing of commercial drafts. (Responsibilities of the PBC)
9. Boosting the efficiency of MSME financing secured by receivables. Core enterprises should be encouraged to facilitate MSME financing secured by receivables and reduce their business costs by ing account receivables on the platform for financing secured by receivables. Banks and other financial institutions should actively connect with platforms for financing secured by receivables, so as to reduce the time and cost of the account receivable ation and ensure efficient financing for MSMEs. (Responsibilities of the PBC, MIIT and SASAC)
10. Supporting the connection to and renovation of the global industrial chains. Financial institutions should improve their financial services for enterprises in the international industrial chains, and take full advantage of interaction between domestic and overseas branches to support the construction of bases for foreign trade transformation and upgrading, the exploration of diversified markets, domestic sales of export goods, as well as the relocation of processing trade to central and western regions. Export enterprises should be encouraged to resume business and trade exchanges with overseas partners by helping them accept and finish orders through buyer’s credit, export finance secured by receivables and insurance policy financing, as well as by sharing risks and losses through proper use of export credit insurance. (Responsibilities of the PBC, CBIRC, SAFE and MOFCOM)
11. Developing SCF secured by inventory, warehouse receipts and orders in a regulated manner. Under real trading backgrounds and with risks under control, financial institutions may select movable properties with high liquidity and sound pricing systems for financing secured by inventory and warehouse receipts. Financial institutions should substantively improve their risk management by leveraging technologies, realize information interconnectivity with core enterprises and management systems in warehousing, logistics and transportation, and timely verify the authenticity and validity of inventory, warehouse receipts and orders. (Responsibilities of the CBIRC, PBC and MOFCOM)
12. Enhancing the support for protection against risks in SCF. Insurance institutions should actively embed themselves in different stages of supply chains, increase the supply of supply chain insurance products such as business interruption insurance and warehouse receipt property insurance, offer collateral-, pledge-, credit-based or other forms of guarantee and insurance services, expand the coverage of insurance, and properly handle claim settlements for supply chain insurance by improving efficiency. (Responsibilities of the CBIRC)
III. Shoring up the supporting infrastructure for SCF
13. Improving functions of the supply chain bill platform. To that end, it is imperative to strengthen functions of bill issuance, circulation and financing-related systems of the supply chain bill platform, bolster the interconnectivity with the supply chain platforms of core enterprises, financial institutions and third-party technology enterprises, clearly define the platform access standards and procedures, promote the matching of supply chain information and that of the bills, and establish an authenticity verification and early warning mechanism for transactions. (Responsibilities of the PBC)
14. Promoting the unified registration and publicity of movable properties and warranty of title. A unified registration and publicity system for movable properties and warranty of title should be built to gradually achieve the goal that market entities can finish registration on a single platform. Moreover, it is necessary to strengthen the the construction of a digitalized system and promote the standardization of elements. In this way, financial institutions will be able to proceed with inquiries and registration in batches through the interface, thereby raising efficiency of the registration and publicity process. (Responsibilities of the PBC and SAMR)
IV. Stepping up policy support for SCF
15. Improving the supervision and inspection rules for SCF. Financial product design, due diligence, approval process and post-loan management should be subject to differentiated supervision based on the specifics of the SCF business. When there is a specific debtor and the repayment funds remain closed and controllable, the bank can lay more emphasis on the credit and the authenticity of the transaction of core enterprises when examining their provision of funds for upstream and downstream enterprises. (Responsibilities of the CBIRC and PBC)
16. Building a credit restraint mechanism. The establishment of the information disclosure system for commercial bills should be expedited to strengthen the market-oriented restraint mechanism. A cross-disclosure mechanism for commercial acceptance bills and bonds should be built. When issuing bonds and disclosing information of commercial acceptance bills, core enterprises should also make public the information on bond defaults and overdue commercial acceptance bills to strengthen credit risk prevention and control. (Responsibilities of the PBC)
V. Forestalling SCF risks
17. Strengthening credit risk prevention and control for core enterprises. In light of the overall performance of the core enterprises and the supply chains, financial institutions should establish a package of mechanisms on risk identification, prevention and control on the basis of loans, bonds, accounts payable and other indicators in core enterprises. Besides, financial institutions should make full use of existing platforms to strengthen risk identification, prevention and control for accounts payable in core enterprises. The SCF business, in which the core enterprise assumes the ultimate repayment responsibility, should be conducted in compliance with the regulatory requirements over large risk exposure. (Responsibilities of the CBIRC and PBC)
18. Preventing the operational risks of SCF business. Financial institutions should apply Fintech in the supply chains, and integrate the information system and risk management system underpinned by the “corporate credit” of core enterprises, “credit of the object” of transaction targets, and “data credit” of transaction information based on the “Fintech plus supply chain scenario”. An online full-process fund monitoring model should be built to enhance the robustness and feasibility of the operating system. (Responsibilities of the CBIRC and PBC)
19. Strictly preventing and controlling risks of fraudulent transactions and repeated financing. Financial institutions such as banks should ramp up efforts in verifying the authenticity of transactions, stay alert against inflated and fictitious accounts receivable and inventory, as well as duplicated collaterals and pledges. Underwriters and asset managers should perform due diligence and necessary risk management procedures on asset securitization with accounts receivable as the underlying asset and asset management products. They shall raise requirements on information disclosure and eligibility of investors. (Responsibilities of the CBIRC and PBC)
20. Forestalling risks in applying Fintech. All players of SCF should make proper use of the next-generation information technologies, such as blockchain, big data and artificial intelligence, continue to improve the capacity of SCF’s service platforms and information systems in ensuring security, monitoring operations and coping with emergencies, and forestall risks that may jeopardize information and cyber security. (Responsibilities of the PBC and CBIRC)
VI. Ensuring stringent regulation and control on SCF
21. Improving payment discipline and account payable and receivable ation
Large supply chain enterprises shall comply with the Regulations on Ensuring Payments to Small and Medium-Sized Enterprises, encompass the number and value of contracts with overdue payments to MSMEs into the companies’ annual reports, and made them public via the National Enterprise Credit Information Publicity System. For large supply chain enterprises in the publicity system that have overdue payments to MSMEs and no disagreement raised on either side, bond management authorities should restrict their additional bond financing. Financial institutions should assess their risks in an objective manner and exercise prudence in providing additional financing. (Responsibilities of the PBC, CBIRC, MIIT and SAMR)
22. Maintaining virtuous industrial cycles. Core enterprises shall not pursue interests by purposefully occupying payables for upstream and downstream enterprises on one hand, and providing financing secured by receivables via related institutions on the other. When exchanging accounts payable, all types of financial service platforms of SCF should adopt financial instruments that comply with rules and regulation, without imposing closure of cycles or restrictions on financing service providers. Relevant authorities should make timely corrections where core enterprises and third-party supply chain platform enterprises squeeze the interests of MSMEs in the name of SCF. (Responsibilities of the PBC, CBIRC and SASAC)
23. Strengthening the regulation of SCF business. National macro-management and industrial policies should be strictly abided by in conducting SCF business. One shall not use any supply chain financial product to evade national management requirements. All types of factoring, micro-credit and finance companies that carry out SCF business should strictly follow their scope of businesses, enhance business compliance and risk management, and shall not conduct financial businesses without license or conduct those beyond the scope of businesses stated in their license. Third-party supply chain platform enterprises of all types must not conduct financial businesses under the disguise of SCF, and must not, in the name of SCF, charge MSMEs fees that are inconsistent with the service provided. (Responsibilities of the CBIRC and PBC)
The People’s Bank of China
Ministry of Industry and Information Technology
Ministry of Justice
Ministry of Commerce
State-owned Assets Supervision and Administration Commission of the State Council
State Administration for Market Regulation
China Banking and Insurance Regulatory Commission
State Administration of Foreign Exchange
September 18, 2020
