Dong Feng: Blockchain warehouse receipts are expected to become the beginning of China's industrial Internet in the next two decades

On January 9, Qianhai Mercantile Exchange (QME) and Ant Financial and Ant Blockchain jointly held a blockchain warehouse receipt alliance construction start-up meeting. Since then, the "QME Warehouse Receipt 2.0 Ecology" technology application project jointly constructed by the Qianhai Joint Trading Center, which has led the production, processing, trade and end-consumer enterprises, as well as warehouses, logistics, insurance and banks, has been fully launched.

Dong Feng, general manager of Qianhai United Exchange Center, attended the launch conference and delivered a speech, sharing his views on the industry from four levels.


The following is the content of Dong Feng's speech, organized by Babbitt:

Regarding QME's blockchain warehouse receipts, we have done full exchanges on other occasions before, so today I want to talk about the essence of this matter and its future significance from another angle.

As you know, a big background for 2019 is that our country's per capita GDP has exceeded US $ 10,000 for the first time. Chinese people do things with due diligence, and whatever we do next, we must first put them in this big context. So what is the most important theme and the biggest proposition for the country in the next ten or two decades? It is China's manufacturing industry to be able to break through the critical point of global share of 35% to 40%. At the same time, as an economy of 1.4 billion people, China can pass the threshold of industrialized countries as a whole. The value measure is about $ 30,000.

Let's think about the significance of this matter. From the industrial revolution to the present, the population of all industrialized developed countries, including the United States, Western Europe, and Japan, is basically on the order of one billion people. If China, as a country with a population of 1.4 billion, joins the club as a whole through manufacturing upgrades, its significance and impact cannot be overestimated.

So in this historical process, what can we do for this matter and what problems can we solve? I think there may be two main bottlenecks:

The first is high technology. Regarding this point, we are all clear about Huawei recently. For at least the next ten years, the technology tree or high-end manufacturing industry represented by chips, new energy vehicles, and large airplanes will surely be climbed by China, and we can see this.

Another big bottleneck, I think, is commodities. The first is the bulk raw materials in the traditional sense. From the perspective of ensuring the long-term development of China's manufacturing industry, and radiating the Belt and Road to output capacity, we must ensure the continuous, reliable, and stable supply of upstream raw materials and energy resources, including the competition for the pricing power of commodities to support the internationalization of the RMB. In addition to commodities in a narrow sense, commodities in a broad sense also cover how the entire economic system from production to circulation develops with high quality and operates efficiently.

High technology and commodities are likely to be tough battles that China must win to achieve its strategic goals for the next two decades. However, China's economy has developed to this day, and there has been a very big shortcoming in the commodity sector.

First , for many traditional industries, there has been a lack of price benchmarks that can reflect the fundamentals of physical supply and demand. Supply-side structural reforms have no grasp, and market-based price mechanisms cannot be used to adjust the real production capacity of upstream and downstream, and are effective. To do resource allocation.

Second , due to the lack of a standardized asset system, a large number of underlying spot assets based on real economic activities and real trade backgrounds appear to banks and financial institutions as off-market non-standard and cannot be used as qualified collateral, which indirectly causes a large number of physical enterprise financing. Difficult and high financing costs.

Third , in the context of the gradual opening up of capital items, the commodity market has not yet fully interconnected in terms of infrastructure, institutional rules, and trade circulation. There is still a long way to go to compete for global commodity pricing rights and the internationalization of the RMB. go.

If we can solve some practical problems in these three aspects, that is, the three pain points around the supply side, difficult financing, and pricing power, I think this is a very meaningful work that we can do in the next ten or two decades. I believe this is also in line with the country's policy orientation. This is the first level of meaning I want to say.

Since we see problems and shortcomings in the current Chinese commodity market, to bring about real industry change, we must have new strength and fresh blood injected into the current market structure.

Who are the main players before the Chinese commodity market?

From the perspective of market participants, there are production enterprises, processing enterprises, distribution enterprises, very important traders, and terminal consumer subjects, which constitute the traditional industrial circle. The financial side is affected by sectoral regulation. One market participant is the bank and the other is the futures industry, including futures exchanges and futures companies. These constitute the most basic pattern of our country's commodity market now.

If the three issues mentioned just now are to be fundamentally addressed, I think these traditional players may not be enough, or enough to spur change in the industry as a whole. Under the current pattern, the commodity market needs fresh blood and new strength.

Today we are at QME, which may be China's first real commodity spot exchange.

Before we entered this market, strictly speaking, there was no such format in China, and there was no accurate classification in terms of supervision. When it comes to commodities, everyone mentions that exchanges are futures exchanges, or hundreds of so-called "local spot trading platforms" that are closer to similar futures or industrial e-commerce. The understanding of the core functions of exchanges has traditionally been limited to prices. Discovery and hedging.

Since its opening in October 2018, QME can be said to be the first real commodity exchange that is geared towards physical and corporate customers and is oriented towards physical delivery. It is a national, credible and independent third-party commodity exchange.

Today, QME and Ant Financial started the construction of the blockchain warehouse receipt alliance, which has added another very important dimension.

In the past, in the field of commodities, the penetration of technology into industry and finance was very low, that is to say, the three sectors of industry, finance, and technology were largely disconnected from each other. So today, QME, as the representative of the commodity spot exchange and ant as a technology company, starts the construction of the blockchain warehouse receipt alliance with many partners. The significance should go far beyond this matter.

In the past, the circle of commodities was traditional players. Today, two newcomers came in, one is a spot exchange, and the other is a technology company, which means that two new types of participants have actually entered the commodity market. It is hoped that after five or ten years of retrospect, today will be the beginning of a brand new and profound era of change in this industry.

This is the second layer I want to say, and I look at this matter today from this perspective.

What I want to say next is that we must not do this for starting this thing today. We must have business logic and be truly sustainable in business. In other words, it must be able to form an effective profit model and be able to continue to move forward through rolling operating cash flows. This is not to say that we pull everyone together, start it lively, and then make some inputs to form a model, and then it is over, this is not the purpose of doing this thing.

We hope that this project, which QME cooperates with Ant and many partners, will become a complete commercial closed loop from the beginning, and will be effectively driven by a win-win situation for all parties. Such a model is reproducible, and it is truly valuable and vital.

WeChat picture_20200122082452

(On January 9, Qianhai Joint Trading Center and Ant Financial jointly held a blockchain warehouse receipt alliance construction launch conference)

This also explains why we chose the blockchain warehouse receipt as the cut-in. I think to do a business thing, first of all, you have to figure out where the profit comes from, either by tearing down the old things or creating new things. My personal understanding is that the essence of blockchain warehouse receipts is actually to serve as a carrier for asset rights and interests in the middle tier to effectively open up finance and entities, funds and assets.

This matter may be different from what people in traditional futures circles think. Traditionally, people are more concerned about real-time price discovery and price games. From the perspective of assets, it is necessary to consider the value of time.

The reason why we chose to do this is because we see that there is a huge structural opportunity in it. It comes from a very big problem that China's economic development faces today, which is the disconnect between finance and the entity.

On the one hand, there is ample liquidity in the financial system. There is a lot of money in the industry and it is cheap, but good assets in the market are scarce and a lot of liquidity is idling. We call it a financial institution asset shortage.

On the other hand, what we are seeing is the difficulty of financing a physical enterprise. A large number of small, medium and micro enterprises and private enterprises cannot obtain financing under the bank's existing credit system based on principal credit, and cannot obtain effective resource allocation.

So the next thing we need to do is to find an entry point to solve this problem. I have been describing this point in one word, the dammed lake of the Chinese economy. A large number of physical enterprises actually bear very high annualized financing costs, but our financial system has ample or even excess liquidity under high leverage. There is a huge structural spread in the middle.

On the bright side, if finance and entities can be effectively connected, then the process of breaking and narrowing the spread can continue to generate stable value, which is the business logic of what we do today. We chose the blockchain warehouse receipt as the entry point, in fact, to find out where the sustainable business path is. I am very confident about this.

Of course this thing is not easy. There are various historical, structural, and practical reasons why the dammed lake has formed and become what it is today. We need to face it directly and do a lot of work to open up roads and mountains.

But as I said just now, as long as the road can be opened, even if the dammed lake opens its mouth, the wheels of the generator will naturally turn. Because the potential energy is there, there is no need to worry about what kind of power to look for after driving. I cannot say thank you for this, but at least to a large extent comes from this dammed lake in the Chinese economy. If it can be opened, it could potentially release the spread behind the tens of trillions of underlying assets based on China's real economy and industrial base.

From a business perspective, we can see a huge structural opportunity through the blockchain warehouse receipts. This is the third level of meaning I want to say.

The last thing to say is related to trends. Today we witnessed the beginning of this matter at QME. From the perspective of doing business, in addition to making sure that it is what the country wants to see, the market needs, and having business logic, each of us also hopes to participate in our lifetime Go for something meaningful.

In the past two decades, I have always said that it was the 20 years when the Chinese consumer Internet boomed, and a number of great companies like Ali and Tencent were born. Twenty years ago, we could not imagine that companies like Ali and Tencent could reach today's market value and create and gather so much wealth. The value of these businesses must come from somewhere, either by breaking old things or creating new ones.

Looking back, why was the consumer Internet for the past two decades? This is related to our demographic dividend, to our infrastructure bonus, to the purchasing power growth and consumption bonus brought by the rapid economic development of China in the past two decades, and also to the technology bonus brought by the Internet and mobile terminal. Factors are superimposed, giving birth to a number of world-class companies.

At this point in time today, we find that these drivers have either reached an inflection point or are approaching the extreme. Looking forward to the next two decades, everyone began to talk about the future direction of the Industrial Internet. But what exactly is the Industrial Internet? Where is the inner logic? Need specific clues, or entry points for landing.

So the meaning of the fourth layer is that what we are doing today may become the beginning of China ’s industrial Internet in the next two decades, or it may be a very good entry point.

If this matter is to be done, it must not be easy. It is necessary to have the prince make it easy and I to make it difficult. At the same time, we must have a positive optimistic attitude towards the future.

My own experience is that I came out of a bank and worked as an enterprise. Now that I have arrived at the exchange, Party A, Party B, and Party C have all done it. I have a deep understanding of this matter.

China's economic development to this day has entered a new stage and needs to find new momentum. Where is this kinetic energy? Many people are pessimistic and think that 2020 will be the best year in the next ten years. Looking back, it may be that the Chinese economy is no longer L-shaped.

It may make sense only to measure the growth rate, but if we look at the quality and efficiency of the entire economic operation, we have a large number of traditional industries that are driven by technology, through financial and industrial connections, and through the reorganization of the logistics supply chain. A very large performance boost. Moreover, we have a unified market with a population of 1.4 billion. In addition to the radiation of the Belt and Road, the breadth gradient and depth of development of this kind of development are not available in other economies. It has never been seen in the history of human industrialization. .

Therefore, I am personally positive and optimistic about the next two decades. I believe that the new momentum of the Chinese economy will come from the transformation and upgrading of the entire industrial system in the future. Back to the Industrial Internet, what we have to do is very clear. In fact, it is four words: get into the game. With participation, everyone can find their place.

This time we worked with the ants to do this. Remembering that 20 years ago, Ma Yun took Alibaba's Eighteen Arhats as a similar starting point. He chose to believe in the future he saw.

Entrepreneurship is difficult. I often recommend Ali's documentaries to colleagues and friends at the time, and I am very moved every time I watch it. Today, we may also be at the starting point of another two decades, to usher in a new industrial Internet cycle. This is a new journey and a new exploration.

Whether we can achieve the goals we set in the future depends on ourselves. Like blockchain warehouse receipts, we started to propose this idea in 2017, but it also experienced many twists and turns before finally reaching today. No matter what the future holds, at least one thing is certain. It is that today's group of people should be able to see this matter more clearly now, and it is also the earliest that they have begun to take action and enter the game. As long as we can move, there are infinite possibilities, and we should be the closest group of people in the future.

Today, together with Ant and many partners, we jointly start the construction of a blockchain warehouse receipt alliance. In the end, I want to express my expectation in one sentence: if we are concentric, if we make mistakes, if we make mistakes, we will never lose a life.

thank you all!

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