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Chongqing: balancing on the pillars of trade

The city of Chongqing looks destined to become the leading city for logistics in China. The municipality’s evolution has been a long and impressive one – and it serves as an effective blueprint for how trade will operate in China in the very near future.

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Pic: Qianximen Bridge, Chongqing

While growth has slowed from recent heights, it remains a hugely impressive 6.6 per cent annually. Indeed, Chongqing took a place alongside Beijing, Shanghai, Guangzhou and Shenzhen in 2018 as one of five Chinese cities which generate more than RMB2 trillion in gross-domestic product (GDP) annually.

"A simple yet thorough three-pillar strategy could establish Chongqing as the most-advanced logistics hub in the world”

It’s a remarkable accomplishment and a testament to Chongqing’s strategy for growth and attractiveness as a logistics hub. And with the right strategy in place there could be even more growth to come.

Indeed, a simple yet thorough three-pillar strategy could establish Chongqing as the most-advanced logistics hub in the world. Those pillars would be to:

  • create an enabling environment using technology and harmonised systems and legislation
  • become the dominant trade processing centre in China through use of tech
  • develop unsurpassed data analytics capabilities.

So, indulge us as we take a look at the possibilities for Chongqing’s exciting future.

Supranational

The first pillar of such a strategy and core to any emergence as a leading logistics city is a regional digital trade platform – one that could connect Chongqing, Hong Kong and even Singapore in a new, supranational trade mechanism.

Effective collaboration could produce an innovative and customer-friendly portal which connects and unifies existing systems, allowing all trade participants to interact easily, quickly, cost efficiently, and transparently – without being restricted by borders or having to invest in new technology.

Such a platform has the potential to capture the lion’s share of all trade finance transactions in Asia.

These connected platforms, interoperable and enabling trade finance ecosystems, are fundamental to the success of a leading logistics hub.

ANZ recognised this was the future of trade some years ago. It became a founding partner of eTradeConnect – a trade finance ecosystem launched in 2018 by seven leading trade banks with strong support from the Hong Kong Monetary Authority (HKMA).

ANZ is also closely involved in Singapore’s ‘one-stop shop’ trade and logistics ecosystem known as the Networked Trade Platform. HKMA and the Monetary Authority of Singapore are also collaborating on the Global Trade Connectivity Network (GTCN) to build superconnectors and ANZ is helping with this as a steering committee member.

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Pic: Farhan Faruqui at The Annual Meeting of the Chongqing Mayor’s International Economic Advisory Council

Through that membership, ANZ is aware and supportive of the proof-of-concept work underway to link eTradeConnect with a similar system sponsored by the People’s Bank of China – to link Hong Kong’s and China’s trade finance markets.

However, creating an enabling environment goes beyond creating a regional platform. It’s also about expanding the trade finance net to close the trade finance gap. Left unsolved, this gap will rise to more than $US2.4 trillion by 2025, according to Bain & Company estimates.

ANZ and other founding banks will also soon commence a pilot on the Trade Information Network designed to satisfy unmet demand for financing earlier in the supply chain. It will support buyers, suppliers and banks by enabling the provision of financing deeper into global supply chains.

These initiatives to create an enabling environment would alone have been a game-changing strategy.

Unprecedented

The second step which could drive Chongqing to unprecedented success is to position itself as the premier trade processing hub in China. The right kind of technological approach has the potential to deliver unparalleled uplift in processing trade transactions across the municipality.

The opportunity from technology such as blockchain is making these developments increasingly accessible around the globe.

At ANZ, the Lygon program was developed to transform the way business obtains and manages bank guarantees. Historically, bank guarantees have been issued manually and on paper. Digitising the process reduces the risk of fraud for all parties involved, decreases the potential for errors and significantly increases the speed of execution.

A World Economic Forum report suggests electronic single windows have helped halve trade document processing times in border agencies, cut trade compliance times to one-third, increased adopting countries’ exports and GDPs and encouraged an overall improvement in transparency and user experience for border clearance.

The use of blockchain is just one of the emerging technologies Chongqing can harness. Machine learning and artificial intelligence are also essential to trade processing, ensuring continuous improvements for quicker, more cost-effective transactions.

Predictive

These first two pillars of a growth strategy for Chongqing cannot exist without a third – data. A data analytics hub powered by machine learning, artificial intelligence and cloud computing could offer enterprises based in the municipality unrivalled data aggregation for predictive forecasting and consumer insights.

Data-driven technologies help logistics and manufacturing enterprises collaborate better on inventory and resource management.

As a simple example, ANZ is helping a global homewares retail business to evaluate where it should locate new retail premises in Australia. The bank’s data analytics revealed the travel time customers are taking to transact with the company and to make purchases. This has supported store footprint expansion discussions.

There are also examples of how companies are acquiring data specialists to complement value chain strategy.

Leading global brand Nike recently bought a retail predictive analytics and demand sensing firm to serve consumers better. Nike plans to use the firm’s AI to help it sell more products, more efficiently and profitably.

Data is important but now sustainability has also become critical in the logistics industry - and leading multinationals are building it into their strategic operations.

Toll Group is building environmentally efficient warehouses but also focusing on cutting the carbon footprint of its transport operations. Investing in fuel and emission efficient vehicles; better aerodynamics in vehicles; and making low rolling resistance tyres standard issue are some of the measures adopted.

Commitment

Chongqing’s growth and leadership in logistics has been the envy of the world for years. But it’s the next five years which could set up its reputation – and prosperity - for generations.

By committing to connecting trade counterparties, harmonising legislation, creating a world-leading processing centre of excellence and building unsurpassed data specialisation while staying on point with sustainability, Chongqing could position itself effectively for even further greatness.

Farhan Faruqui is Group Executive, International at ANZ

This article is an edited version of a presentation given by Faruqui at the 14th Chongqing Mayor’s International Economic Advisory Council, where he respected ANZ for the third time. This article was originally published on ANZ’s Institutional website.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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