In recent years, with the promotion of national policy, the supply chain finance of our country has ushered in a new development opportunity. The phenomenon of high accounts receivable is serious all the time. The functions of bill payment, settlement and financing have the inborn advantage to solve this problem. In this paper, the copper industry chain as the research object to explore the development of commercial bills to support the supply chain.

1.General situation of copper industry chain in China、

 (1) development situation and characteristics of copper industry

From the production situation, the overall operation of China's copper industry is stable, refined copper production has maintained a steady growth trend. In December 2020, China's refined copper output totaled 986,000 tons, an increase of 10.9 percent year-on-year. In 2020, China's refined copper output totaled 10.025 million tons, an increase of 7.4 percent year-on-year. In the past 10 years, China's copper industry has experienced a rapid growth period from 2011 to 2016, with an annual cumulative output of about 20 million tons and an annual average growth rate of 19.13% for refined copper.

From the distribution, China's copper production is mainly concentrated in Jiangxi, Jiangsu, Zhejiang, Guangdong, Anhui five provinces. In 2020, copper production in the five provinces accounted for 18.78 percent, 16.21 percent, 12.50 percent, 12.03 percent and 12.02 percent, respectively, and accounted for 71.54 percent of the country's total output. Among them, Jiangxi is China's largest copper smelting, copper processing base, but also an important copper consumption area.

In terms of price, the average price of copper for three-month delivery on the LME in 2020 was $6,186.87 a tonne, up 2.83 per cent year-on-year. The price of copper fell sharply in the first quarter of 2020 as global economic uncertainty increased due to the impact of the new crown disease, which hampered logistics and supply chains. With the domestic epidemic gradually stabilized under control, the resumption of production and resumption of work. At the same time, with low interest rates, stable growth and consumption policies in most countries, the global economy has gradually recovered, supporting copper prices out of the trough, gradually returning to the normal price trend.

From the perspective of import and Export Trade, from 2011 to 2019, China's copper has been showing a trade deficit. Net imports reached $3,302.47 million in 2011, after which they fell and exports stabilized. In 2019, copper exports totaled US $4,114.95 million, while imports totaled us $5,482.15 million and net imports totaled US $1,367.20 million. In addition, China's dependence on foreign countries for copper ore and its concentrate continued to increase, with the import value of copper ore and its concentrate reaching us $33,908.94 million in 2019, an increase of 118.51 percent over 2011.

From the operating income of listed companies, according to the a share copper industry-related listed companies have disclosed financial data, 19 listed companies in 2019 total operating income of 710.212 billion yuan. Among them, Jiangxi Copper Industry, which occupies the leading position in the copper industry by an absolute margin, has 240.36 billion yuan in operating income, accounting for one-third of the total income of 19 companies. Tongling nonferrous metals and China Molybdenum are ranked second and third with 92.951 billion yuan and 68.677 billion yuan respectively. On net profit, Jiangxi Copper's parent company earned 2.466 billion yuan, ranking first among the 19 listed companies in the copper industry. Western resources and * St Mengzhou two companies showed losses, * St Mengzhou loss of up to 1.132 billion yuan. At the beginning of 2020, the epidemic situation of the new crown had a certain impact on the production and operation of copper industry enterprises. The price of copper metal dropped greatly, and the operating income and net profit of nearly half of the listed companies in the copper industry decreased in the first quarter compared with the same period last year. Jiangxi Copper continued to top the list in terms of revenue size and net profit, with operating income of 56.206 billion yuan in the first quarter of 2020, up 15.04 percent from the same period last year. The year-on-year growth in revenues was driven by the completion in July 2019 of the acquisition of a 100 per cent stake in IXM, formerly the world's third-largest metals trader for Louis Dreyfus. In the first quarter of 2020, operating income of Yunnan Copper rose 52.15 percent from a year earlier. The company reported increased production of copper concentrates and increased sales of its main products during the reporting period. At the same time, the company continues to strengthen management, effective cost control, leading to the main business profitability.

(2) main problems faced by China's copper industry

The structural contradiction of copper smelting industry is prominent. On the one hand, China is short of copper concentrate resources and has a high dependence on foreign countries. China had 26 million tons of copper reserves in 2019, accounting for only 3.13 percent of the world's total, according to the U.S. Geological Survey (USGS) . The recoverable reserves of copper mine have been decreasing continuously. According to the related research, under the present technical and economic conditions, only 35 million tons of copper mine can be mined in China, and most of them are located in the ecologically fragile areas such as the qinghai-tibet Plateau (Liuqunyi, 2020) . China is also a big consumer of copper resources, the import of copper concentrate is increasing, the dependence on foreign countries is increasing, which has deepened the influence of copper resource exporters on the pricing of copper processed products. On the other hand, China's copper smelting Capacity utilization is not high, increasing overcapacity. In 2019, China's refined copper production capacity reached 12.59 million tons per year, but in 2019, refined copper production was 9.784 million tons, or only 77.7 percent of Capacity utilization.

Copper Concentration ratio are low and high-quality copper products are scarce. At present, China's economy is still in the stage of rapid development, industrialization and urbanization will inevitably bring about the growth of copper demand. With the continuous increase of copper consumption, the copper industry develops and expands rapidly. The disordered growth and blind expansion lead to the problem of the concentration of copper industry-related enterprises. The structure of copper industry as a whole shows the characteristics of small scale, scattered distribution and confused development. Under the concentration degree, many copper processing enterprises in China are at the primary level, the products have the same quality problem, the competition of copper industry is fierce and the profit space is small. In addition, the threshold for copper enterprises to obtain credit support from banks is high, and many copper enterprises, especially small and medium-sized copper enterprises, have difficulty in obtaining credit funds, lEAD TO COPPER PROCESSING ENTERPRISES SHELVED R & D process, using low prices of competition, leading to a vicious circle, the lack of domestic high-quality copper products.

Strengthened environmental protection policy, copper enterprise environmental protection risk. Copper smelting is a high energy-consuming and high-emission industry. Each ton of refined copper requires about 1 ton of Standard Coal and 5 to 10 tons of water resources. At the same time, a large number of by-products such as waste acid, waste Alkali, heavy metals and tailings will be produced during the smelting process, if can not handle properly, will bring the serious resources waste and the pollution, will bring the negative exterior of the ecological environment, has the environmental protection risk. With the expansion of the scope of state environmental supervision and the increase of its strength, the copper industry, as one of the key prevention and control industries, is facing more and more pressure of environmental control. To a certain extent, the implementation of the environmental protection tax impels copper enterprises to carry out the environmental protection transformation, while those enterprises that fail to carry out the environmental protection transformation will face the risk of transition or closure. In addition, the investment in environmental protection treatment will be relatively large, which will increase the production cost of the enterprises, result in the decline of market competitiveness of enterprises.

(3)The development direction of China's copper industry

On the basis of full understanding of a series of problems existing in copper industry in China, copper supply-side reform should be promoted from the aspects of "reducing production capacity" , "promoting innovation" and "reinforcing weak board" . We will increase the concentration of the copper industry and control the expansion of production capacity. It is urgent to solve the problem of excess capacity in the copper industry and promote the supply-side reform. The key is to adjust the overall structure of the "small" , "scattered" and "disordered" copper industry, it will control the disorderly expansion and repeated construction of copper enterprises, promote the survival of the fittest in production capacity, actively promote the centralized development and rational distribution of the copper industry, and advance along the direction of copper supply-side reform. Promote Product R & D and Innovation to meet the needs of emerging markets. At present, copper enterprises are generally satisfied with the production of primary products, through price competition, is not conducive to promoting high-quality development of copper industry. To change the current situation of the copper industry, we need the guidance of state policies, the lowering of the threshold of Bank credit support, and the broadening of financing channels, in order to push forward the copper enterprises to actively increase investment in research and development, change the homogeneity of copper products, and improve the economic benefits of copper enterprises, expanding the living space of enterprises. In the emerging market, China's new energy automobile field is developing rapidly, which is the important growth point of copper consumption in the future. Related research shows that the copper consumption of new energy vehicles (about 90KG/vehicle) is much higher than that of traditional vehicles (about 20KG/vehicle) . Based on the average copper consumption of 75KG/vehicle, the annual increment of copper consumption contributed by new energy vehicles is about 70-80000 tons, the growth rate is much higher than the overall growth rate of refined copper consumption (analysis and forecast of global and Chinese copper supply and demand in 2019) . Copper enterprises should seize the opportunity, increase the innovative R & D and production of copper products in emerging areas, and further promote copper supply-side reform. Maintain Resource Security, develop circular economy and promote green production. China's copper demand continued to grow, and domestic copper concentrate resources shortage, self-sufficiency rate of less than 30% , serious imbalance between supply and demand, high degree of dependence on foreign. Excessive dependence on imports of copper resources is not conducive to the maintenance of China's resource security, but also limits China's copper processing products pricing autonomy. Therefore, it is necessary to further strengthen the exploration and development of domestic copper resources, and at the same time, promote the transition from traditional copper industry to high-quality recycled copper industry. In addition, facing the negative externalities of ecological environment, production technology and pollution control technology should be strengthened, and efforts should be made to minimize the input of resources and maximize the output of finished products. To further establish a more complete copper industrial chain, integrate upstream and downstream enterprises, carry out reasonable recovery and reuse of the wastes generated in the production process, strengthen the internal circulation of resources, and improve the utilization ratio of resources, to minimize environmental pollution in every link of copper industry chain, alleviate the negative externalities of ecological environment in copper industry, promote green production and develop circular economy.

2.Supply chain financing of Copper Industry 

(1) basic structure of copper industry chain

The production process of copper products is divided into three stages: copper ore mining, copper smelting and copper material processing. The copper industry chain is divided according to the production stage of copper products, may divide into the upstream copper mine enterprise, the middle reaches copper smelting enterprise and the lower reaches copper material processing enterprise. Upstream is the source of copper industry development, mainly the exploration, mining and separation of copper ore, the scarcity of copper ore resources will restrict the development of copper industry; The process of producing 99% pure refined copper or 99.9% pure electrolytic copper (also known as Cathode Copper) from copper concentrate and scrap copper by pyrometallurgical or hydrometallurgical smelting, in the process of smelting, by-products such as gold, silver and sulfuric acid are produced; downstream is the copper material processing link, and refined copper is processed into copper products such as copper wire, copper bar, copper pipe, copper plate, copper foil and copper alloy, downstream copper products are mainly used in electric power, construction, household appliances, transportation, communications and other industries.

(2)Financial demand analysis of supply chain in copper industry

Compared with the traditional credit financing model, supply chain finance has the characteristics of close connection with goods transaction, clear capital demand and periodic change, and can provide corresponding financing service for different enterprises in the industrial chain. According to different transaction nodes of copper industry chain, copper industry supply chain finance mainly involves three stages: inventory purchase, inventory custody and sales refund. Inventory procurement phase. The financing needs in the inventory procurement phase mainly come from the downstream purchasers and distributors. In the copper industry chain, inventory purchase is the base of production and sale. As the buyer, the downstream dealer is in a relatively weak position. When the downstream small and medium-sized enterprises (smes) are short of funds in the order purchase stage, they will need to finance their future inventory.

Inventory stage. Copper enterprises from the completion of production to product sales, from the completion of procurement to product distribution, there is a certain time difference between in-transit, pending sale of copper products in the inventory management phase. At this stage, there will be a large amount of inventory cost, so the owner of inventory has a financing need to speed up the turnover of inventory.

Sales recovery phase. Copper concentrate is the supplier of copper in the upper reaches of the copper industry chain. Copper is used in every aspect of life. The consumption demand of copper resource continues to rise. Copper suppliers finance their sales by pledging or selling accounts receivable in order to speed up the recovery of sales.

(3) current supply chain finance model for copper industry

Through the high-quality supply chain financial services provided by commercial banks, the core enterprises help to stabilize the upstream suppliers, support the downstream dealers, and strengthen their core competitiveness in the copper industry. Based on the different types of collateral, the financial models of copper supply chain can be divided into prepayment financing, inventory financing and accounts receivable financing. Advance financing. Prepayment financing is a supply chain financing mode corresponding to the stock purchase stage, and it is the financing of "future inventory" based on the real trade background. "advance/post-purchase credit" is a typical business in the copper supply chain financial model: After the buyer (dealer) pays a certain percentage of deposit to the bank and other financial institutions, the bank pays the full advance payment to the supplier based on the additional repurchase commitment of the supplier (usually the core enterprise) , and the supplier delivers the goods to the third party logistics warehouse enterprise designated by the bank in accordance with the terms and conditions stipulated in the procurement contract, after the goods arrive, a mortgage is set up as a bank credit guarantee, and after the buyer deposits the sales money into the bank in accordance with the agreement, the bank issues the goods of the corresponding amount to the buyer according to the instructions of the bank. Through prepayment financing, the downstream dealers can rely on the real trade background and the support of the core enterprises to finance, and alleviate the financial pressure brought by the one-time payment of large prepayment; the core enterprises can also reduce their accounts receivable, improving financial statements.

Inventory financing. Inventory financing is a supply chain financial business model corresponding to the inventory stage, also known as inventory financing. INVENTORY FINANCING MODEL in supply chain finance includes static mortgage credit, dynamic mortgage credit and warehouse receipt mortgage credit. Compared with the characteristics of stable inventory, uniform goods and easy to estimate the value of collateral, the dynamic collateral is more suitable for the copper industry chain. Dynamic hypothecation credit is based on the "Warehouse Supervision Agreement" signed by the bank, the financier and the warehouse. The inventory owner delivers the inventory as a pledge to the third party logistics and storage enterprise, the bank provides credit to the demander of funds and sets a minimum amount of the value of the pledged commodities. The financing enterprise provides the bank with additional margin or barter according to the agreement, and then the warehouse releases the goods according to the bank's instructions.

Accounts receivable financing. Copper Industry Core Enterprises and upstream suppliers signed the "Procurement Agreement, " and then formed accounts receivable. The upstream supplier transfers or pledges the account receivable creditor's rights to the bank to apply for financing, the bank and the supplier notify the core enterprise and get the confirmation, the bank grants credit to the supplier, the core enterprise pays the purchase price according to the agreement.

3.The application model of bills in supply chain finance of copper industry

(1) intervening in the upper and middle reaches of the copper industry chain

When a commercial bank grants credit to a copper industry group, a joint-stock Company or a financial company on its own initiative and grants a certain credit line, the copper processing enterprise applies to the financial company controlled by the group for acceptance and issuance of financial or commercial notes, endorsement to pay upstream-copper refining enterprises, copper refining enterprises may choose to receive the financial bill or commercial bill in the finance company discount financing, or in the commercial bank discount financing has been granted credit, it can also choose to continue to indorse payment to upstream-copper mining enterprises; copper mining enterprises can choose to continue to indorse payment after receiving the bills, or discount financing in finance companies, commercial banks, the group holding finance company can transfer the discount notes to the Commercial Bank and adjust the scale of the credit. The group holding finance company can transfer the discount notes to the Commercial Bank and adjust the scale of credit, to better serve its members in the next step. Under this financing model, for the middle-stream enterprises, the paper transfer accounts payable to commercial bills/financial bills, zero financing cost, optimize the balance sheet, stabilize the upstream enterprises in the industrial chain, ensure the stability of the enterprise suppliers; For the upstream enterprises, the bill of accounts receivable can be standardized, the bill can be directly financed, the financing process does not need guarantee or mortgage, greatly reduces the difficulty and the financing cost of enterprise financing, broadens the financing channels, and efficiently realizes the refinancing of accounts receivable, improving the capital turnover rate of the upstream enterprises in the industrial chain.

(2) intervening in the middle and lower reaches of the copper industrial chain

In the middle and lower reaches of the copper industry chain, inventory purchasing is the main stage. As the buyer, the downstream dealers are in a weak position in terms of amount and time limit. Based on the real inventory purchase transaction in the copper industrial chain, the sales company may apply to the Commercial Bank for a letter of credit, after paying the advance payment from its upstream supplier, apply to the bank for the issuance of a bank underwriting payment, and the copper processing enterprise shall apply to the bank for a discount after receiving the bank underwriting, the selling company may also choose to apply to the Group Company for acceptance by the ACCEPTOR, and the copper processing enterprise may continue to endorse payment by the acceptor after receiving the acceptance, may also choose to apply to the commercial bank commercial ticket guarantee discount, the commercial bank based on the group company's credit, deals with the discount for the copper processing enterprise, and bears the discount cost by the sales company; Copper processing enterprises may also choose to package their bills into standardized bills or bills ABS for direct financing, or to set up a pool of bills, pledge different bills into the pool, and issue new silver submitters or contractors to continue payment flows, solve the mismatching of amount and account period. Under this financing model, for downstream enterprises, the bill of accounts payable solves the problem of capital shortage, reduces the financing cost, improves the inventory turnover rate, and strengthens the stickiness with their upstream suppliers, it has realized the monetization of accounts receivable, increased the rate of return on inventory, the discount cost of bills is borne by the sales company, and there is no financing cost. After the establishment of the Bill Pool Business, the problem of mismatch in terms and amounts has been solved, and the capital turnover rate has been speeded up, it reduces the financial cost, after packing the bill into the standardized bill or the bill ABS, it broadens the financing channel, reduces the financing cost, and optimizes the balance sheet.

3.core enterprises involved in the copper industry chain

The refined copper enterprise is the most important one in the whole copper industry chain and occupies the core position, which is commonly called the core enterprise. For such enterprises, which hold a large number of commercial bills of varying amounts, maturities, and promiscuity on the part of the accepting bank, the Commercial Bank may establish a pool for the refined copper enterprise to pool the commercial bills it holds, based on the amount of the pool of bills generated, the refined copper enterprise may issue silver bearing to pay for circulation, or it may choose the issuer to pay for circulation. The upstream supplier-copper mining enterprise may apply to the Bank of the refined copper bill pool for a commercial bill guarantee discount, deducting the amount of its bill pool, can also continue to indorse payment, can also hold notes packaging for standardized bills or bills ABS in the financial markets, such as direct financing. This financing model can activate the core enterprise inventory notes and accounts receivable, solve the enterprise term, the amount of mismatch problem, and if choose to issue commercial paper model, for refining copper enterprises is zero-cost financing, it can optimize the balance sheet and stabilize the upstream enterprises in the industrial chain

In addition to the bill pool business, commercial banks can also choose to introduce the guarantee company mode into the core enterprises of the copper industry chain. Based on the credit line granted by the Commercial Bank to the Guarantee Company, the Guarantee Company may grant credit to the core enterprises of the copper industry chain on its own initiative, carry out white list management, and be paid by the commercial invoice issued by the refining copper enterprise to the outside, when the upstream enterprise receives the commercial paper accepted by the core enterprise, it may endorse the payment, or it may choose to sign a guarantee agreement with the guarantee company, and the Guarantee Company will guarantee the commercial paper by endorsing the commercial paper. After completing the guarantee action, it may apply to the Commercial Bank for the commercial paper financing, commercial banks make loans to upstream enterprises on the basis of the letter of credit granted by the Guarantee Company and the guarantee letter issued by the Guarantee Company. This kind of financing model, for the core enterprise, will pay the accounts payable to the commercial paper payment, zero financing cost, optimize the balance sheet, stabilize the industry chain upstream enterprise, has guaranteed the enterprise supplier stability; Compared with accounts receivable, holding the commercial paper issued by the core enterprise can continue to pay, or go to the Commercial Bank for convenient refinancing, the financing process does not need to guarantee or pledge, greatly reducing the difficulty and cost of financing for the enterprise, improving the capital turnover rate of the upstream enterprises in the industrial chain.

(4) the risk points of note financing in the copper industry chain

Risk points from the core enterprise. The credit risk of core enterprise is the main risk factor of supply chain finance business. Commercial Banks Credit to small and medium-sized enterprises, the essence of which is indirect financing for core enterprises. In the process of developing the supply chain financial business, the risk of the core enterprise will spread to the upstream and downstream enterprises through the supply chain, the careless management of the core enterprise is easy to cause the huge chain reaction. Usually, the core enterprises will sign loan contracts with several banks. In order to increase lending to small and medium-sized enterprises in supply chain finance, commercial banks will often enlarge the credit lines of the core enterprises, this has expanded the core enterprise's credit invisibly, has proposed the huge challenge to the Enterprise Fund Management and bank risk management. Risk points from smes. Compared with large enterprises, medium-sized, small-sized, micro-and private-owned enterprises have smaller scale, lower credit degree, opaque financial information and lack of continuous operation record, which is unfavorable for commercial banks to evaluate their credit. Operational risk. At present, China has not formed a set of perfect operation rules of supply chain finance. In order to better coordinate the participants of supply chain, banks need to design different financing schemes for each supply chain, this may pose an operational risk. The operation risk of supply chain finance will be caused by imperfect bank management system, imperfect supervision mechanism, immature staff's business and communication ability. And with the continuous extension of the supply chain, the structure of the supply chain will become more and more complex, the probability of errors occurring in the process of information transmission between upstream and downstream enterprises will also increase, and the information delay and understanding deviation will cause the communication difficulty between enterprises, will also form interference to the bank's judgment, increases the supply chain financial operation risk.

4. Countermeasures and suggestions to prevent the risk of supply chain financing

Ensure the authenticity and self-compensation of the transaction. The supply chain finance of copper industry is based on the real trade background of supply chain enterprises, which should focus on the authenticity and self-compensation of transactions. Financial institutions should strengthen cooperation with copper industry group, carefully examine and evaluate the financing application of small and medium-sized enterprises in the supply chain, select the enterprises that meet the requirements, and reduce the financing risk of the supply chain. Tracking the use of funds in a targeted way. In order to pursue self-interest maximization, the enterprise may change the use of the Fund after obtaining the financing money in order to obtain the high return. Therefore, when cooperating with the same trade group, the financial institution should determine the loan amount on the basis of the financing enterprise's actual business scale and the real transaction contract, and avoid excessive credit. Improving information sharing level of supply chain enterprises. The asymmetry of information is an important cause of credit risk. Copper Industry Group should set up a good information sharing platform to enhance the efficiency of information transmission, so as to reduce the Information asymmetry, the occurrence of "adverse selection" and the supervision cost of financial institutions. Set up a strict system of rewards and punishments. On the basis of strictly controlling the financing process of supply chain, we can consider setting up reward and punishment mechanism, through disclosing the bad information, we can regulate the performance behavior of each credit subject, and reduce the probability of credit risk. 

Source: Netease News, Jiangxi University of Finance and Economics by Qin Shujuan, Yu Luting, Li Ziwei, Li Linghui

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