Level One People With No Transgressions
Level One is the most desirable rank. These people have done nothing wrong, and their lives go uninterrupted by the governments new social credit system.
Level Two: People with some transgressions They might have committed one offence.
Level Three: People with poor credit history They might have committed four of the following:
- Level Three, People with poor credit history
Level Three is the third-best rank. These people might have committed four of the following:
Level Four: People with no financial responsibility They might have committed six offences
Level Four is a more negative rank. These people might have committed six violations.
Level Five: People who break laws or commit crimes They might have committed seven offences.
What Can You Do To Prepare For The Implementation Of The China Social Credit System
While some valid concerns have been expressed about the trials of the social credit system so far, the potential benefits for foreign companies looking to extend or establish their operations in China cannot be underestimated. If it works as intended, the social credit system will mean:
- A leveled playing field against domestic companies. Through publicly accessible databases, foreign companies will be able to know that they are doing business with a reliable partner. This is especially important for enterprises when they first enter the China market. To date, this information was primarily known by local Chinese companies in the know
- Standardized credit ratings across China. Foreign companies will be able to have confidence that a rating given to a company in Shanghai will be based on the same factors as a credit rating given in Shenzhen.
In preparation for the implementation of the China social credit system, it is imperative that businesses both foreign and domestic understand which information they need to provide to authorities. Once this information is identified, businesses should conduct an internal audit which will allow full compliance with the necessary regulations.
In addition to these measures, businesses should prepare a supply chain audit and confirm that any business partners meet social credit guidelines.
Businesses should also analyze their IT and data security, as the transmission of this data to government bodies will need to be undertaken.
Blacklists And Redlists In The Chinese Social Credit System
So far we have made several references to the blacklists and redlists associated with the China social credit system. So what exactly is a blacklist?
China currently has a number of national and regional blacklists based on various types of violations. It is expected that over time, the system of blacklists will be fully integrated with the social credit score.
Businesses can be placed on a blacklist due to a particular violation or because of a poor social credit score. A government notice released in 2016 encourages businesses to consult the blacklist before they hire someone or assign them a contract.
Please note that companies will not be blacklisted automatically for compliance failures. The corporate social credit system also maintains an irregularity list. This list deals with significant , non-compliance.
Presence on this list means the business is in danger of being blacklisted and should quickly take steps to improve its reputation.
The Chinese government utilizes the blacklist in multiple ways. The list itself is frequently being analyzed, with the available information on both its citizens and companies listed in their Master Database working as a template for assigning each person a score.
Its important to note that being blacklisted under one agencys jurisdiction may leave the affected party subject to blacklisting from the remaining agencies across the country .
Don’t Miss: What Is A Perfect Credit Score 2020
Whats The Point Of Chinas Social Credit System
The guiding Chinese principle behind the social credit system, as noted by the Washington Post, is that Keeping trust is glorious and breaking trust is disgraceful.
When you visit China, youll notice that the Chinese government plays an active role in things like Internet censorship to control and culturally shape its population in the manner that keeps the Communist Party in power.
The social credit system is just one of many means for the Chinese government to further monitor and culturally shape its population. This one, however, has an incentive structure built in.
What Is Chinas Corporate Social Credit System
While the social credit system in China is universal in application, the policy focus to date has been on its application to companies. According to one analysis, 73 percent of policy documents released to date have been focused on the application of social credit in the corporate sector.
The goal of the corporate social credit rating is to combine data from many different sources to provide a public searchable database of companies, and to evaluate and score those companies against a list of compliance criteria.
While the corporate social credit rating is still in a development phase, the goal is to work towards a Comprehensive Public Credit Rating, which will provide an overall score for companies operating in China.
In the meantime, companies need to use a range of existing databases providing information and evaluations of companies, based on overlapping, yet distinct datasets. The databases can be national, regional, local, and based on particular industries.
Businesses are assessed based on compliance, financial and audit records: More than 33 million businesses in China have been assessed to date.
Important concepts in the corporate social credit system include:
Below we look at how to check your status using a key national database, CreditChina.
Recommended Reading: Is 621 A Good Credit Score
What Are The Incentive And Punitive Measures For Taxpayers In China
After determining the taxpayer credit rating, the tax authorities will implement administrative measures, including incentive and punitive measures, accordingly.
As we can see from the table below, contrary to Type A taxpayers who will be entitled to favorable treatment like streamlined administrative procedures and fast-tracked approvals, Type D taxpayers could face increased frequency of supervision and inspection and stricter scrutiny on a wide range of tax-related matters, such as application for invoice issuance and value-added tax refunds on exported goods and monitoring business compliance.
Furthermore, the State Taxation Administration has actively been participating in the construction of Chinas social credit system and the exploration of cooperation on credit sharing.
In 2015, the STA and the China Banking and Insurance Regulatory Commission set up the Bank-Tax Cooperation mechanism. Tax authorities committed to forwarding part of the taxpayers tax credit information to banks under the premise of legal compliance and enterprise authorization. Banks will be able to use this information to optimize their credit model and provide credit loans for trustworthy small and micro firms. Since November 2019, the scope of beneficiaries has been expanded from Type A and Type B taxpayers to include Type M taxpayers .
Rewards In Chinas Social Credit System
On the other end of the spectrum, there are positives of the social credit system for people and corporations who are determined to be outstanding members of Chinese society. In this context, the opposite of being blacklisted is to be redlisted . Redlisting allows citizens and companies access to certain privileges that will impact their day-to-day lives.
There are a range of rewards for businesses that do well in this regard, including:
- Streamlined administrative procedures. For example, companies that are classified as an Advanced Certificate Enterprise may receive faster customs clearance. A-rated tax-payers may have their tax returns processed more quickly
- Fewer inspections and audits
- Fast-tracked approvals.
Recommended Reading: What Credit Report Does Chase Pull
Level Six Those Who Have Committed Crimes Against The State
Level Six, those who have committed crimes against the state.
Chinas Social Credit System is a comprehensive system that monitors data from six different sources. Each level, from one to six, determines a persons social score and social status.
This article was designed to show the complexity of overlapping scores. How different offences in the same category can have multiple consequences or rewards. This is a plain overview to lay out a few details of what we might be in store for in the next few years with Doconomy is on its way.
Services Provided By The China Credit Information Service
Employing over 5,500 individuals, the China Credit Information Service provides many services. These include risk management, fintech solutions, an online database of corporate information, market research, asset valuation, and an online bookstore that distributes regular publications.
In its overall framework, CCIS “guarantees the constant upgrading of the breadth and depth of credit information and provides qualified consulting services, assisting clients in implementing effective credit management solutions as well as evaluating and reducing business risk.”
Furthermore, CCIS’s focus is on “performing risk assessments, preventing outstanding debts, reducing transaction costs and investments, and speeding up market exploration.” The goal is that with a large database that consists of the of companies and individuals, CCIS can promote safe and fast lending, increasing growth and profitability in the Asian markets.
Two of the most important and widely used reference materials in Asia provided by CCIS are “The Largest Corporations in Taiwan Region-TOP5000” and “Business Groups in Taiwan Region.” These two documents are published annually.
Recommended Reading: What Do Landlords See On Your Credit Report
Criticisms Of The Scs
Why so many are scared of the SCS is because some of the crimes are incredibly ambiguous , and the punishments are extreme and take away basic human rights from Chinese citizens. For example, in 2016 a Chinese lawyer was not allowed to buy a plane ticket because an apology he had issued was deemed to be insincere. Judging how sincere someones apology is is incredibly subjective, and not something that should prevent a person from having basic rights.
That being said, Chinese citizens are already under an incredible amount of government surveillance and there have been no criticisms of the SCS from within the country. Probably because its citizens are too scared to speak up.
There are also doubts that the SCS will ever be rolled out on a national level. The program was supposed to start this year, and while individual cities and provinces have laid some groundwork, the Chinese government has yet to introduce anything nationally. The full roll out of the program could be years away simply due to the vastness of China. However, four provincial level governments already have their own version of the SCS.
The Chinese government faces other problems too, specifically regarding corruption. The whole purpose of the SCS is to share information and be transparent. If people are focused on their own interests over the governments, thats a big power struggle waiting to happen.
Chinas Social Credit System And Foreign Tourists
So what does Chinas social credit system mean for you as a foreign tourist to China? In short, absolutely nothing.
The program focuses entirely on Chinese citizens and some sources, including this article published in Foreign Policy Magazine, claim that Chinas social credit system isnt even real.
So if youre worried that you lack the social credit to travel to China and that youll be monitored to the point where youll have your own social credit score before you leave, you can rest easy and focus your attention on seeing the best sights China has to offer.
If youre an expat doing work in China, however, youll have to contend with another, very real system: Chinas foreign expat grading system.
Also Check: What Is Resident Verify On My Credit Report
Social Credit Score: A Dangerous System
For Americans, the term Social Credit Score was unknown. However, social credit scoreshave become well known as other countries like Canada and Britain consider implementing it. Considering many people do not know the true meaning behind this system, they might consider it safe and harmless. That sentiment is wrong. In fact, any country should see this system and move quickly in the opposite direction. A Social Credit System is the most dangerous threat to everyones personal liberties.
How To Check Your Companys Corporate Social Credit Score Using Creditchina
is a search tool , providing a range of information on companies and individuals. Information incorporated into its assessments includes:
- Basic identifying information for the company, including the companys Unified Social Credit Code and permits held
- Any applicable administrative penalties
- Any payment defaults recognized by the Courts
- Any instances of tax evasion and fraud
- Instances of illegal importing or exporting
- Unpaid wages
There are several sub-databases provided, including one relating to redlisted companies, one for blacklisted companies, and one for companies with irregularities.
To proceed with checking your rating or score in CreditChina go to the CreditChina homepage as shown below:
Then, take the following steps:
The record that you see, will show:
- Any administrative permits held by the company
- Any administrative penalties applied to the company
- The presence of the company on redlists
- The presence of the company on blacklists
- The presence of the company on any irregularity list.
If you find negative entries , you should seek advice on how to improve your situation. Or, if you think there has been an error, you can make a complaint seeking directly to the authorities seeking a correction of your record.
Recommended Reading: How To Write Credit Analysis Report
What Is Chinas Foreigner Grading System
You may be sighing breaths of relief knowing the Chinese social credit system could be nothing more than myth. But what about Chinas foreigner grading system?
For folks traveling to China in the hopes of landing a job, the scoring system for expats is something youll have to deal with to acquire a work permit.
But if youre traveling to China solely for travel and applying for a travel visa, then you dont need to worry about the scoring system for expats whatsoever.
The scoring system for expats is also nothing new and has already been in place for several years. But if youre not familiar with Chinas foreigner grading system, to bring you up to speed, its a points-based system to vet foreigners looking for work in China.
Why Is The Corporate Social Credit System Important For Your Company
The corporate social credit system is important for two reasons. First, you need to know who you are doing business with in China. The corporate social credit rating lets you look up potential business partners and collaborators and check their reliability. Second, understanding the corporate social credit system is essential for your own business. In order for other companies and the government to be willing to engage with you, you need to continually demonstrate that you are a compliant entity.
Looking up your corporate credit rating on the available databases is essential in order to check that you are on track. We recommend that you seek professional advice and assistance to ensure that your company can increase its positive credit entries and decrease the number of negative entries.
Don’t Miss: Why Is It Important To Have A Good Credit Score
Provenance And Early Attempts
The SoCS, which first emerged in China in the early 2000s, was inspired by credit scoring practices elsewhere in the world, such as FICO in the United States and Schufa in Germany. In the main blueprints for the system there was no reference to large-scale scoring of individuals. It did, however, spawn tangentially-related initiatives like Alibabas Sesame Credit, but this was only indirectly related to the SoCS and, in any case, the Peoples Bank of China eventually denied the company a credit license. Only in late 2016 did the State Council Chinas top governmental body formally refer to the idea that it would explore the establishment of a personal integrity score management system.
From the early 2010s, some cities indeed started scoring pilots. However, these gradually became controversial even in China. The city of Suining reportedly deducted points for government petitions and online comments, Suzhou planned penalties for reservation no-shows or cheating in online games, and Rongcheng for littering or jaywalking. Many of these pilots were later criticized by official media or failed to materialize. The most common critiques were that scores illegally restricted citizens legal rights or tracked behavior totally unrelated to the notion of credit.
What Happens If You’re Blacklisted
Liu Hu is a journalist in China, writing about censorship and government corruption. Because of his work, Liu has been arrested and fined and blacklisted. Liu found he was named on a List of Dishonest Persons Subject to Enforcement by the Supreme People’s Court as “not qualified” to buy a plane ticket, and banned from travelling some train lines, buying property, or taking out a loan.
“There was no file, no police warrant, no official advance notification. They just cut me off from the things I was once entitled to,” he told The Globe and Mail. “What’s really scary is there’s nothing you can do about it. You can report to no one. You are stuck in the middle of nowhere.”
What recourse is there? With the government system, if you want to be removed from a blacklist, you can either pay your bill or appeal to the court, says Jing Zeng, a researcher at the University of Zurich. “Bring your money to the court and then you get removed from the system,” she says. “It’s not a judicial system by itself, it’s still the court you need to .”
However, the Chinese justice system leaves much to be desired, says Hoffman. “There are no genuine protections for the people and entities subject to the system,” she says.
Alongside the potential for abuse of power, the knock-on effects of statewide surveillance, and the likelihood of incorrect data, Ohlberg notes the a few bad marks on a social credit record could spark a negative spiral.
You May Like: How To Remove Serious Delinquency On Credit Report