Business group issues wake-up call on China's corporate 'social credit' plan

Business group issues wake-up call on China
Business group issues wake-up call on China's corporate 'social credit' plan  

By Michael Martina

BEIJING (Reuters) - The rollout of China's controversial corporate "social credit system" is well under way and accelerating, a European business lobby in the country said on Wednesday, warning that foreign governments need to wake up to the plan's potential risks.

Beijing has been developing a globally unprecedented plan to give companies and individual people "social credit" scores, a goal that has drawn international concerns that it could heighten to Orwellian levels the already strict control that the ruling Communist Party has over society and the economy.

In a roadmap plan released in 2014, China said it would by 2020 create the system to reward or punish individuals and corporations using technology to record various measures of financial credit, personal behavior and corporate misdeeds.

Some experts say that the system remains nascent and could help tackle social problems like fraud or food security, while reducing government discretion in regulating companies.

But one of the authors of a new European Union Chamber of Commerce in China report on the system's implications for companies said that it could become a "surgical instrument" for compelling companies to meet China's political aims.

"It is a very, very potent instrument of regulating, controlling and steering companies in a targeted way," Bjoern Conrad, chief executive officer of Sinolytics, a consulting firm that helped draft the report, told reporters.

Companies "cannot decide between legal and illegal anymore. You have to decide where you want to be on the good and bad scale," Conrad said.


Foreign companies operating in China have long griped about restricted access to its massive market, and more recently have begun sounding alarms about the growing state role in the economy under President Xi Jinping.

Those complaints are at the core of the United States' criticisms of China's trade practices that have plunged the two countries into a bitter trade war.

The chamber said the corporate social credit system is part of a "major shift" in China's market access limits for foreign companies as the government enhances its ability to control firms' behavior even as it pledges to scale back on traditional constraints, such as joint venture requirements and restricted sectors for investment.

According to the chamber, China will assess all companies using about 30 ratings, many of which have already been implemented, on nearly all aspects of their businesses, including tax and customs records, environmental protection, product quality, data transfers, pricing, licenses, and regulatory compliance.

Negative ratings on a forthcoming punishment mechanism could mean penalties ranging from potentially small fees and exclusion from subsidies and tax rebates, to blacklisting.

"Being a legal representative of a company in China means that your individual rating of the social credit system is directly related to the company and vice versa," Conrad said.

A company could also be rated, and punished or rewarded, based on the record of its suppliers and partners, the report said.

There is no guarantee that the ratings cannot be applied in a "biased way", and foreign firms might be caught between Beijing's prerogative and requirements back home, it said.

Chamber President Joerg Wuttke said it appeared the Chinese government was currently focused on enforcement in its own market and not yet on shaping the behavior of companies in international markets, but that it was a concern.

"It is definitely a wake-up call to western governments, and OECD governments to take this up with China," Wuttke said of the report.

(Reporting by Michael Martina; Editing by Kim Coghill)


More Related News

Global Cases Top 80,000; HK Extends School Closure: Virus Update
Global Cases Top 80,000; HK Extends School Closure: Virus Update

(Bloomberg) -- The spread of the coronavirus outbreak to regions from Italy to Iran sparked concerns about a pandemic, with the number of cases worldwide topping 80,000.Global stocks tumbled after Italy reported at least six deaths and more than 200 confirmed cases. The U.S. Centers for Disease Control

Dow plunges 880 points as coronavirus cases outside China jump
Dow plunges 880 points as coronavirus cases outside China jump

U.S. stocks tumbled Monday after a sharp rise in coronavirus cases outside China revived concerns about an economic fallout from the outbreak.

Expelled Wall Street Journal reporters leave China after headline row
Expelled Wall Street Journal reporters leave China after headline row

Two Wall Street Journal reporters left China on Monday after being expelled over a controversial headline in an op-ed that angered Beijing. Three reporters were ordered out of the country last week over what Beijing deemed a racist headline that the journalists were not involved in writing -- marking one of the harshest moves against foreign media in years. The Journal opinion piece -- headlined "China is the Real Sick Man of Asia" -- was written by a US professor who criticised the Chinese government's initial response to the coronavirus outbreak.

Trump's 'Big' China Trade Deal Has Some Really Big Problems

The remaining issues, such as cyber theft, cyber security, and standardization, are untouched by the Agreement and could be the source of tension in the future.

China's Xi says epidemic 'grim,' calls for action on economy

Warning that China's virus epidemic is "still grim and complex," President Xi Jinping called Sunday for more efforts to stop the outbreak, revive industry and prevent the disease from disrupting spring planting of crops. Xi defended the ruling Communist Party's response as "timely and effective" in a video conference with officials in charge of anti-disease work, according to the official Xinhua News Agency. "The current epidemic situation is still grim and complex," Xinhua cited Xi as saying.

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


  • Loan
    (2019-09-11 15:03:24Z)

    I hope that China's corporate takes this wake-up call seriously, and does something meaningful now. Giving Loan to students would be one way to go forward, and if they take this route, people all over the world will be pleased.


Top News: Economy