Medical Blockchain Finance Alliance Led by Yilian Tech, JD Finance, and Tianyi Group Files IPO Prospectus to Empower Healthcare Supply Chain with Blockchain

On May 29, the “Medical Blockchain Finance Alliance,” jointly initiated by MedLink Tech, JD Finance, and Tianyi Group, was established in Beijing. The alliance is committed to empowering the medical supply chain with blockchain technology, facilitating privacy protection for medical data, anti-counterfeiting and traceability across the supply chain, and trusted asset financing.

Inauguration Ceremony of the Medical Blockchain Finance Alliance

Blockchain technology and its applications are among the most cutting-edge topics in today’s tech industry, with Initial Coin Offerings (ICOs) and digital currency issuances repeatedly thrusting blockchain into the spotlight and shrouding it in an aura of mystery.

However, the innovation of blockchain does not lie in its sensational wealth myths, but rather in its transformation of industrial relations, production relations, organizational structures, and trust mechanisms. Most importantly, blockchain technology and its applications have established trust relationships on the internet. At its core, blockchain is an internet security protocol, akin to TCP/IP, HTTP, and SMTP protocols, enabling transaction participants to maximize their trust in one another.

The key technologies enabling this trust relationship comprise four elements: first, the adoption of a block-plus-chain structure; second, the use of distributed storage; third, the application of asymmetric encryption algorithms; and fourth, the implementation of smart contracts. Each of these technologies introduces exciting new features to blockchain, and together, these four key technologies make blockchain a decentralized, traceable, tamper-proof, and intelligently executable new technology.

Blockchain technology and supply chain finance have a natural synergy. This is because supply chain finance is also a form of financing based on "trust." In layman's terms, supply chain finance is a financing model in which financial institutions such as banks link core enterprises (large companies with significant bargaining power in the industrial chain) with their upstream and downstream partners to provide financial products and services.

The rationale for collaborating with upstream and downstream enterprises to deliver financial services is to leverage the industrial chain—anchored by core enterprises—to provide credit endorsement for businesses, particularly small and medium-sized enterprises (SMEs). This approach exemplifies a key practice in financial risk control.

In the traditional supply chain finance model, large enterprises, with their substantial asset bases and comprehensive credit histories, find it relatively easy to secure support from financial institutions. In contrast, small and medium-sized enterprises (SMEs) often struggle to obtain such support due to factors such as short operational histories, incomplete corporate credit profiles, and smaller asset scales, thereby leading to the persistent challenges of difficult and costly financing for SMEs.

The key to resolving this issue lies in “trust.” As long as small and medium-sized enterprises (SMEs) can demonstrate sufficient debt-servicing capacity, sound operations, and low default risk, financial institutions will be willing to provide them with financing services.

To build trust in small and medium-sized enterprises (SMEs) among financial institutions, there are actually more methods available beyond traditional evaluation metrics such as asset appraisal and credit reporting. These include guarantees, transaction verification, and collateralization. The change brought by blockchain technology is the "blockchain-ification" of SMEs' transaction data, which establishes a consensus mechanism across all links of the supply chain finance system. This enables financial institutions to "trust" SMEs and thereby provide them with financial services.

Blockchain and supply chain finance have a natural synergy, which is the primary reason why initiators choose to apply blockchain technology to medical supply chain financial services. However, in a relatively specialized industry with higher entry barriers like healthcare, the application of blockchain technology is far more complex than theoretical models suggest.

We know that current blockchain technologies are categorized into three types at the application level: public chains, consortium chains, and private chains. Public chains are open to everyone; anyone can read and send transaction information for validity verification, and anyone can participate in their consensus process. Data on public chains is open and transparent, with high levels of participation. Representative applications include Bitcoin and Ethereum.

Consortium blockchains are open to select organizations and individuals, with participation governed by authorization for joining or leaving. Network nodes are pre-selected, fostering strong collaboration among them. Data on the chain can be either publicly accessible or restricted for internal use, as exemplified by Hyperledger.

Private chains are single-center networks operated by private institutions, with a limited scope of participating nodes and strict access control over data usage. Data is generally not made public, and write permissions are restricted to users within the network. Private chains offer fast transaction speeds and low costs; however, the data remains proprietary to the institution, the number of participating nodes is small, and the data may even be subject to tampering or rollback.

The Medical Blockchain Finance Alliance has adopted the “Cloud-Chain Network” technical architecture. The alliance has established a technology platform—an open platform based on a hyper-converged infrastructure—enabling various enterprises, applications, data, and assets to be integrated onto the blockchain. Members collaboratively enhance and enrich the data and applications within the consortium chain.

Ultimately, a network was formed that is grounded in data-driven supply chain finance operations. Leveraging blockchain features such as distributed ledgers, immutability, consortium consensus, and smart contracts, the platform connects all consortium parties via a blockchain middleware solution, thereby constructing a new generation of hyper-converged business architecture composed of consortium members’ business systems and their proprietary blockchain networks.

From on-chain recording of pre-loan credit assets, through mid-loan rating, credit granting, and fund flows, to post-loan continuous risk control and supervision, the entire process enables end-to-end evidence storage and traceability, safeguarding compliance management in financial asset securitization financing.

The alliance has also garnered support from various stakeholders across the industry chain, including asset originators (core enterprises) such as Sinopharm, CSPC Pharmaceutical Group, Realcan Pharmaceutical, and Humanwell Healthcare; as well as funders such as the Beijing Financial Assets Exchange, China Merchants Bank, China Everbright Bank, and Ping An Bank. This support itself serves as a form of endorsement, reflecting the trust placed in the alliance by all parties within the industry chain.

Industry insiders believe that the continued development of the supply chain finance market is driven by three major favorable factors: first, the continuous improvement of the social credit system and the increasing reliance on transactional credit; second, the emergence of new supply chain finance models, such as industry-finance integrated supply chain finance and “Internet Plus” supply chain finance; and third, growing attention to the difficulties and high costs faced by small and medium-sized enterprises (SMEs) in obtaining financing, which is expected to drive exponential growth in the SME financial services market in the future.

From a policy perspective, the development of supply chain finance services is also highly favorable. First, policies encouraging the growth of small and medium-sized enterprises (SMEs) have significantly promoted their development; second, policies related to financial service innovation have paid considerable attention to supply chain finance services.

According to data from the Qianzhan Industry Research Institute, by 2020, the market size of domestic supply chain finance in China will approach RMB 15 trillion, which means that there will be a huge market for providing information, credit, and platform services around all links of supply chain finance.

In the specific field of healthcare, the lengthy industrial chain results in varying bargaining power among different institutions and enterprises. Many companies within the healthcare supply chain face financing difficulties, such as insufficient collateral and pledges, information asymmetry regarding credit, and weak risk resistance. However, broadly speaking, the healthcare supply chain finance service market has not yet achieved scale or a systematic structure, with relatively few companies and business models currently involved.

How large is the medical supply chain finance market? Based solely on hospital material procurement costs, according to the China Health Statistics Yearbook, national hospital material procurement expenditures in 2017 are projected to reach RMB 1.3–1.5 trillion. Assuming that 20%–30% of these expenditures require financial services, the long-term market size for medical supply chain finance is expected to reach RMB 300–500 billion.

In the field of healthcare supply chain finance, blockchain has significant applications. Blockchain can facilitate oversight in trusted transactions and management of accounts receivable, end-to-end transaction traceability, and cross-institutional interoperability and mutual benefit. Furthermore, practical implementation scenarios can extend to equipment financial leasing, supply chain factoring, and pharmaceutical traceability.

In fact, both before and after the establishment of the Medical Blockchain Finance Alliance, some companies had already begun to engage in blockchain-enabled medical supply chain finance services. For instance, Huaye Capital acquired accounts receivable from suppliers of Grade A tertiary hospitals at a discount, providing financing services to upstream suppliers. It would either collect payments from the hospitals upon maturity of these receivables or sell them to financial institutions through asset securitization. Meanwhile, Feiyi Network released the first white paper on blockchain technology in the medical supply chain sector, deeply integrating blockchain to technologically upgrade its medical supply chain cloud platform.

The establishment of the Medical Blockchain Finance Alliance marks the emergence of a new business model characterized by the deep integration of technological innovation, financial innovation, and the real economy. By adopting a new operational model that integrates industry, finance, and technology, the Alliance will leverage finance to empower the healthcare sector, unite stakeholders across the medical industry, promote the healthy development of the medical supply chain, substantially enhance the efficiency of financial services, and build a new platform for industrial blockchain finance.

[MedChain Technology]

MedChain Technology was established in January 2017, focusing on the integrated innovation of medical industry-finance technology. Based on transaction scenarios within the medical industry supply chain ecosystem, it leverages a BaaS-enabled cloud platform to support “Supply+” and “InfoComm+” in connecting asset providers, accumulating supply chain credit data to establish data-driven models for G2B, S2B, SPD, SMB, and TAS. It connects capital providers by offering supply chain finance services backed by the creditworthiness of core enterprises, with multi-tier SMEs in the supply chain serving as financing entities. By reshaping the supply chain finance credit system with blockchain technology, it achieves trusted on-chain confirmation of asset claims and enhances the efficiency of asset-capital allocation through securitized financing structures.

[JD Finance]

JD Digits began independent operations in October 2013, positioning itself as a technology company serving financial institutions. The company is committed to leveraging emerging technologies such as big data, artificial intelligence, cloud computing, blockchain, and the Internet of Things (IoT) to provide financial institutions with digitalized, omnichannel online-to-offline solutions covering people, products, and scenarios. These services help financial institutions enhance efficiency, reduce costs, and increase revenue across core value chains—including scenario expansion, customer acquisition, operations, risk control, and research and development—thereby driving the entire industry into the era of intelligent finance.

[Tianyi Group]

Founded in 1998, Tianyi Group is a leading industrial and investment conglomerate in China centered on healthcare. Meinian Onehealth (SZ002044), the core industrial platform of Tianyi, was established by the group’s founder, Mr. Yu Rong, in 2006. It merged with Dahang Health Group in 2011 to form “Meinian Dahang,” and successfully listed on the A-share market in 2015. Currently, it is a constituent of the CSI 300 Index and ranks first among publicly listed medical service companies by market capitalization. Under the Tianyi Investment Group umbrella are multiple industry funds, including Zhongwei and Zhongfu. Since 2004, these funds have successfully invested in more than 20 companies that have gone public, with the total market value of companies within its ecosystem exceeding RMB 100 billion.