In China, A (Trade)Shift To Supply Chain Digitalization

Much is made about China as one of the biggest markets for just about any vertical. But among the millions of firms operating within the country, data flow can be less than efficient, especially between businesses transacting with one another.

At the end of last month, Tradeshift, which offers a platform for suppliers and also offers software for tax and regulatory compliance, announced two joint ventures within China that seek to connect millions of firms that do business through trade and also streamline invoicing through digitization. There’s also an initiative to offer trade-based financing to smaller firms within China.

In an interview with PYMNTS, Tradeshift Cofounder Mikkel Hippe Brun stated that the cash flow cycles in China can be extremely long, with months marking the time between delivery of goods or services and final payment. In the meantime, he said, one of things lacking in China is that, for smaller firms, “there is little access to capital” as banks are hesitant to lend to these firms. With a rocky road to accessing needed funds, gathering momentum to satisfy the country’s cross-border trade goal to $2.5 trillion within a decade may prove onerous — unless digital platforms help firms gain access to money they need to grow. “A lot of the turnaround time is eliminated” in getting invoices where they need to go and getting paid.

To that end, Tradeshift has formed a joint venture with Shenzhen XunLian Technology Development to offer supply chain financing. The firms said last week that, together, they will process $30 billion in gross merchandise value annually across enterprises based in China, privately owned and state-owned. Early financing is also being made available across the platform, said Brun.

In addition, the company has begun a joint venture with Baiwang, called Baiwang Tradeshift. The impetus is to help firms navigate the shift from provincial business taxes to VAT, so far across more than 100 customers. Navigating taxes and compliance, said the firm, is crucial to opening what Brun termed “a gateway to China for multinational firms.”