Supply Chain Financing

Supply Chain Finance (SCF) is a type of financing where financial institutions unite core enterprises with upstream and downstream SMEs electronically and provide financing products and services. With high demand yet low overall market penetration, the development potential in supply chain financing is huge, with an estimated fund gap for small enterprises around RMB 20 trillion. The SCF market can be characterized into three development stages: Stage 1.0 – a vertical model catered to specific industries, Stage 2.0 – a platform model that connects funding and financial assets, and Stage 3.0 – a network model that enables information exchange and a digitized supply chain assets trade. Currently, the SCF market in China is evolving from Stage 1.0 to Stage 2.0, while innovative technologies such as AI, blockchain, cloud technology, big data, and IoT (ABCDI) will accelerate SCF development and usher progression to Stage 3.0. There is significant demand from suppliers and SMEs for accessible funding and products. Optimizing the business model of SCF through data and technology will be the key to unlocking future market potential. From our perspective, exploring high-quality SCF technology projects around the themes of ecology, technology, and data is crucial in the early stages of investment. In latter stages, focus should be shifted to proven integrated Fintech companies that can build an end-to-end ecosystem of products and services. Prior to these stages, we suggest the deployment of key node service providers with a strong SCF network presence. These may include fund providers, asset providers, and other business participants (e.g. high-value data providers, producers, and software, hardware, regulatory technology manufacturers). This will shift the market towards stage 3.0 of development, yielding high investment value and growth potential. To read our full insights report, please contact us at bp@bitrockpartners.com