In a speech delivered in late 2019, China’s president Xi Jinping encouraged the mass adoption of blockchain technology by the country and elaborated on the numerous potential applications it could find in an array of sectors in China’s economy. A few months down the line, major developments have taken place including the setting up of a national committee for setting blockchain standards, piloting a cargo clearance project in one of the country’s major ports, the testing of a mobile application linked to China’s digital currency project, and the launch of a major nation-wide blockchain infrastructure network. These developments are taking place at a time when most major economies are struggling with the impact of COVID-19, while China is outpacing the USA in the development of blockchain technology and implementation of massive payment infrastructures.
China announces major companies among members of national committee
China’s Ministry of Industry and IT has announced a list of members forming part of its National Blockchain and Distributed Accounting Technology Standardization Technical Committee. Several major Chinese companies were announced among the committee’s members, including telecommunications equipment company Huawei, the e-commerce company JD.com, the internet search provider Baidu, Tencent which owns the popular messaging platform WeChat, and Ant Financial, a FinTech affiliate of Alibaba Group.
While the Committee’s purpose was not established by the Ministry of Industry and IT, it is assumed that it will be setting standards for blockchain technology. While such initiatives are common amongst private companies, the establishment of this committee is one of the first initiatives taken at national government level in the world.
Implementation of blockchain technology in cargo handling
On the 7th April 2020, CargoSmart, a shipping logistics solution provider, announced that a pilot project was conducted in December 2019 with Cosco Shipping Lines (COSCO), Shanghai International Port Group (SIPG), and Tesla, Inc. which involved the implementation of blockchain technology in cargo clearance at the Port of Shanghai. This process involved the real-time exchange of data between the port operator and the shipping carriers on an application running on blockchain. Traditionally, the process of cargo clearance involves several documents to identify the consignee and the shipping agent. A crucial piece of documentation is the sea waybill/bill of lading which signifies that a contract of carriage exists between the shipper and the carrier and it also serves as a receipt of the goods shipped. Through the pilot project, COSCO and SIPG could view Tesla’s shipping documentation via the cargo release application, which was updated in real time and COSCO’s sea waybills could be accessed by SIPG which sped up the entire process and decreased cargo release time. Furthermore, the implementation of blockchain technology prevents disruptions which could occur through the loss of sea waybills, without which ports cannot release cargo. CargoSmart plans on carrying out similar pilot projects in a number of other terminals in China, including Xiamen and Qingdao.
The Blockchain-Based Service Network (BSN) developed by the BSN Development Association will be launching on the 25th April 2020. The whitepaper describes the BSN as a “cross-cloud, cross-portal, cross-framework global infrastructure network used to deploy and operate all types of blockchain applications”. Six different entities make up the BSN Development Association which first announced its plans to develop the network in October 2019. These entities include the State Information Center of China, two major companies from the Telecommunications Industry; China Mobile Communications Corporation Design Institute Co., Ltd. and China Mobile Communications Corporation Government and Enterprise Service Company, the finance giants China UnionPay Corporation and China Mobile Financial Technology Co., Ltd. and the software company Beijing Red Date Technology Co., Ltd.
The aim of the project is to encourage the adoption of blockchain technology by those individuals and entities which are typically unable to develop their own infrastructure on blockchain applications due to the high costs associated with developing and implementing such technology. By providing public blockchain resources, the BSN Development Association hopes to foster growth in this industry by making the technology accessible to small, medium and microenterprises as well as individuals. The BSN will allow three types of services to be performed on its network; the provision of cloud service resources, the provision of blockchain frameworks which developers can then use to deploy their own applications on, and portal operators. Since the BSN is an open network, any entity complying with the BSN protocol standards can use the network for these services.
So far, the BSN already has one hundred public city nodes across China, however the aim of the BSN Development Association is to create two hundred public city nodes globally thereby encouraging global adoption of the network. In fact, discussions are already underway with global carriers and cloud service providers.
Testing app released for China’s Central Bank Digital Currency
China is currently testing a mobile application which uses China’s Central Bank Digital Currency (CDBC), which is officially referred to as the Digital Currency Electronic Payment (DCEP) and is issued by the People’s Bank of China.
A screenshot of a digital wallet has emerged in local media linked to the Agricultural Bank of China, one of China’s state-owned banks. The wallet displays payment functions such as payment through scanning, as well as sending and requesting money. Features related to wallet management were also displayed such as digital currency exchange, e-wallet management, linking accounts to the e-wallet, and also real time transaction tracking. Currently, the pilot app seems to be available exclusively in Suzhou, Xiong’an, Chengdu and Shenzhen, and the DCEP will be tested among state employees for the payment of salaries and transportation allowances for the time being.
In December 2019, it was reported that the CBDC would start undergoing pilot testing through a collaboration between the People’s Bank of China and China’s four major banks and three telecom companies. The Agricultural Bank of China was part of this collaboration. The pilot testing was planned to take place in Shenzhen and Suzhou.
While cryptocurrencies were infamously banned by the Chinese government, the DCEP is sanctioned by the government and pegged 1:1 to China’s Yuan in a bid at establishing the digital Yuan as a global currency and a counterpart to Facebook’s Libra, thereby undermining the U.S. dollar.