China targets blockchain for commodities and trade finance

Yesterday China’s Ministry of Commerce and 12 other departments issued a notice promoting the “platform economy” for the commodities sector. The aim is to encourage digitization using technologies such as big data, Internet of Things and blockchain.

In the last year, several global commodity sectors including energy, agribusiness and metals have started to consider blockchain as a way to share data within the industry. To date, the key benefit targeted is improved efficiencies in operations (oil extraction), logistics (agribusiness), post-trade processes (oil) and trade finance (commodities).

Chinese companies are already involved in some of these international initiatives. For example, COFCO International is the Swiss-based overseas investment and asset management arm of Chinese agribusiness COFCO Group. It recently joined the agribusiness consortium made up of Archer Daniels Midland, Bunge, Cargill, and Louis Dreyfus Company. Together the companies aim to digitize agribusiness shipping.

The state-owned COFCO Group claims to be China’s largest food processing company with a turnover of more than $70 billion. While its core business is grain, oil, sugar and cotton, the product range is far broader.

IBM recently announced a cobalt blockchain traceability initiative for ethical mineral sourcing. That involves Ford, LG Chem and China’s Huayou Cobalt. Apple also uses cobalt sourced from the Chinese company for batteries.

The Chinese Ministry of Commerce’s missive has extremely broad aims. It includes empowering small and medium-sized businesses to participate in an “open” platform. It envisions innovative business models and trade credit information needs to be standardized. That’s just for starters.

Doubtless, the hope is to see the sort of consumer-focused innovation seen from Alibaba, JD and Tencent translated into business-to-business markets.

Global commodity blockchains