"Ticketing, shipping, and insincerity": Analyzing the deep-rooted causes and dangers of some state-owned enterprise supply chain trade becoming "channel business"

When state-owned-enterprise supply-chain trade becomes an outright “channel business” that’s only about running tickets and moving goods, its essence has turned into a dangerous game of disguised financing in the name of trade.

By: Huamao Rong Caijing Content Team

Produced by: Trade Finance

The goods never move on-site; funds are merely circulated and transferred for the purpose of inflating transaction volumes or completing a funds bridge. Since late 2025, Moreto Trade (rights protection) has had overdue debts of over RMB 2.8 billion, and the Huadong copper-trading circle has seen unusual freezes of over RMB 10 billion in funds related to cargo rights—both rooted in this.

This completely departs from the core positioning of state-owned enterprises as organizers and stabilizers of industrial chains. Their role degrades from value creator to a “risk conduit,” further exacerbating the misallocation of financial resources.

Distorted performance evaluations and survival anxiety: the original driving force behind channel business

A distorted evaluation mechanism is the primary internal cause. Under an evaluation system centered on revenue, expanding transaction volumes becomes the most direct way to meet targets.

“Channel” business has low barriers and fast cash inflow, enabling companies to quickly beautify their financial statements. This forces corporate behavior to become short-term, with disorderly business activities, forming the “two noncompliances” that urgently need to be cleaned up.

In March 2026, Fujian Minhou Construction Investment was publicly criticized for accounting for supply-chain trades that did not meet revenue recognition conditions using the gross-sum method, leading to a one-time reduction of revenue by RMB 819 million. This is far from an accounting error; it reflects a dual distortion of business model and incentive orientation.

Behind this lies the real predicament of state-owned enterprises’ “dual attributes.” They must complete market-based performance evaluations, yet lack mechanisms to build core industrial service capabilities. The silence of many companies exposes the hollowing-out of both their industrial insight and professional ability.

Some local state-owned enterprises try to inflate assets by “moving volume” through trade. This illusory expansion is now facing the regulator’s sword. The State-owned Assets Supervision and Administration Commission of the State Council’s Order No. 74 strictly prohibits fake trade, and the “Implementation Measures for Accountability Investigation for Illegal Operations and Investments by Central Enterprises” to be enforced in 2026 establishes a lifelong accountability system. If they rely on channel business to dress up financial statements, responsible individuals face the ultimate risk to their careers.

Broken “four flows” and failed risk control: full detachment of business substance

The most lethal feature of “channel business” is the break in the “four flows” and the suspension of risk control. Real trade requires the “four flows”—contracts, goods, invoices, and funds—to be integrated, and companies must control cargo rights.

In channel business, however, state-owned enterprises as intermediaries often neither verify the goods nor take on risk; they simply sign contracts, issue invoices, and route funds based on instructions, earning a fixed fee of a few per thousand.

This means companies give up the most core functions of price discovery and risk management. Their service loses the foundation for risk pricing. Their channel fees of a few per thousand cannot be explained as a risk premium; in substance, it is “discounted cash-out” of national credit.

The “four requirements” for taxation and “Golden Tax Phase IV” are mirrors that expose wrongdoing. Many channel companies reveal their true nature here. Once they are deemed to have issued fake invoices or deceived for tax rebates, the consequences are severe. In July 2025, Jiangxi Jishui Jinhao Wood Industry Co., Ltd. was heavily fined RMB 3.0711 million for fabricating export business.

Regulatory arbitrage and financial risk: the chain of transmission of systemic hazards

Avoiding regulation and channeling funds into restricted areas for illegal investment is the core motive. Financial institutions such as banks are constrained by credit policies; so funds are made to flow into prohibited zones via complex nested transactions.

State-owned supply-chain companies are often selected as a key link because of their state-owned background and a compliant trade “shell.” Multiple major incidents involving repeated pledge blow-ups of warehouse receipts for bulk commodities exposed the risk-transmission pattern beyond doubt in late 2025.

Relevant state-owned platforms, in the name of “regulation,” actually act as “endorcers,” opening the door for repeated financing. State-owned credit becomes a “risk accelerator.”

Such a multi-layer nested structure with blurred rights and responsibilities greatly increases the fragility of the financial system. Channel parties often attempt to seek exemption by claiming they only provide transaction administration, but judicial practice has already clarified their liability. In a relevant case in April 2020 by the Shanghai Financial Court, the channel party that failed to fulfill its duty of examination was found to bear supplementary compensation responsibility. In April 2025, the PBOC and six other departments jointly issued Document No. 77 to strictly curb fake transactions.

Misplaced positioning and hollow value: the fundamental deviation from the mission of state-owned enterprises

Diving into channel business means serious loss of the correct positioning in the new-era mission of state-owned enterprises. The core functions of state-owned enterprises should be to serve national strategies, safeguard industrial security, and lead innovation.

In the supply-chain sector, they should play the role of “chain leader” to ease the practical difficulties faced by small and medium-sized enterprises. However, in channel business, state-owned enterprises not only fail to create value; instead, by using their state-owned credit to provide “invisible guarantees,” they distort resource allocation.

The decline trajectories of some local state-owned enterprises reveal the “chronic toxicity” of channel business. To chase scale, their revenue share from channel business is abnormally high, gross margin is below 1%, and their on-the-ground enterprise networks and professional teams shrink. Ultimately, their fragile nature—hollowing out of their core business—was exposed when a cooperation partner defaulted.

Profit should come from outstanding risk management and real industrial services, not from hiding risks and inflating assets. Industry best practices point the way forward. In 2025, the Shandong Branch of China Construction Bank innovated “de-nucleation chain lending,” financing upstream based on core enterprise orders. Pangang Group issued the first batch of central-enterprise supply-chain notes—ABCP—injecting industrial-chain funds at a low cost of 1.83%.

These explorations point to the same core: the value of state-owned supply chains must be reconstructed—from a “channel” that looks big but is fattened by scale, to a “hub” built on industrial insight.

When the tide goes out, you find out who was swimming naked. The fake prosperity of channel business cannot conceal its fragility and destructiveness. It is both a distorted product of distorted performance evaluations and a dangerous game of regulatory arbitrage, as well as a collective loss of direction in the mission of state-owned enterprises.

With the construction of lifelong accountability and “full-chain” regulation, this model has entered its end stage. Transformation means a fundamental shift in evaluation from “scale” to “quality,” a rebuilding of organizational capability from “financing arbitrage” to “deep industrial cultivation,” and digital investment to achieve penetrative risk control.

Once the door of “channel business” is shut completely, what will decide the future will no longer be the “techniques” for bypassing regulation. The real test is whether, after stripping away all “channel” activities and the meager channel fees, companies can rely on deep understanding of the industry and professional capabilities to find an irreplaceable and solid value position within the real-economy supply-chain.

Stepping into the opening year of the “15th Five-Year Plan” period, supply-chain finance shoulders a key mission in serving the modernization of industrial systems and developing new quality productive forces. Against this backdrop, the 12th China Supply Chain Finance Annual Conference in 2026 should be held on schedule, aiming to gather wisdom from across the industry. The conference will be guided by national strategy and will deeply discuss a series of core topics, including how state-owned enterprises as “chain leaders” can empower the entire industrial chain and new solutions for cross-border finance in the context of RMB internationalization, among others, jointly exploring feasible paths for financial institutions to precisely serve the real economy and support industrial upgrading.

This is a value-connection event focusing on the most cutting-edge practical challenges in the industry and new thinking. You will hear interpretations of policy frontiers here, learn from benchmark companies’ breakthrough plans, and engage in in-depth exchanges with all parties in the ecosystem. Whether it is regional small and mid-sized banks exploring differentiated competitive strategies, or all parties jointly balancing innovation and compliance in practice, sparks will fly through the dialogue. The concurrently held “2026 12th China Supply Chain Finance Industry Benchmark Awards” election is intended to pay tribute to outstanding practitioners who emerge in solving these industry challenges. We sincerely invite you to attend, and on April 8, 2026, meet in Beijing with colleagues in the industry to jointly draw a new blueprint for the industry’s development.

This is an important industry exchange event in the field of supply-chain finance. We sincerely invite you to attend the conference, discuss development, and contribute to progress in the industry.

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