Exec Summary

No time? No problem. We’ve distilled this report down to a few critical takeaways.

  • China’s social credit system is primarily a tool for regulating corporate behavior in the Chinese market. Read more
  • It consists of three main components: a master database, a blacklisting system, and a mechanism for punishing bad credit and rewarding good credit.
  • There is no such thing as a national social credit score for individuals or companies (yet). The central government doesn’t issue credit scores. It does, however, keep a master database of credit files, to which various state agencies, banks, and other groups are given access. Read more
  • The master database is called the National Credit Information Sharing Platform. It’s controlled by the central government, and it stores thousands of datasets on companies and individuals. About 75% of the data in this database will be open to the public. Read more
  • Companies and their legal representatives, as well as individual citizens, can be blacklisted for severely violating any number of existing operational regulations. Read more
  • The key violations that result in blacklisting are:
    • Not honoring legal obligations
    • Failing to pay employees (especially migrant workers)
    • Fraudulent financial activity
    • Tax evasion
    • Import-export offenses
    • Violations of cyberspace laws
    • Violations of environmental laws / excess energy consumption
    • Endangering public health and safety
  • The blacklisting system is complicated. There are hundreds of different blacklists controlled by different state agencies. Each agency has the power to blacklist companies and individuals that fall under their own jurisdiction. For example, the Ministry of Ecology and Environment can blacklist companies for environmental violations. The Cyberspace Affairs Commission can blacklist companies for violations of cyberspace law. The tax bureau can blacklist tax evaders. Read more
  • Under the “Unified Rewards and Punishments” framework, being blacklisted by one state agency means being subject to punishments and restrictions by all state agencies. For example, companies that violate import-export laws and are subsequently blacklisted by Customs will be penalized by the courts, the banks, environmental regulators, market regulators, cyberspace regulators, and several dozen other bodies. Read more
  • Companies that have an exemplary credit record will be “redlisted”. Companies redlisted by one state agency will be rewarded by all state agencies. Rewards include lower taxes, fast-tracked bureaucratic procedures, preferential consideration during government procurement bidding, and other perks.
  • A company’s social credit records, including blacklist and redlist information, qualifications and permits, and safety / production inspection results, are openly published on a new website, called the National Enterprise Credit Information Publicity System.
  • The social credit of a company is directly tied to the personal credit of its key personnel.
  • The SCS has a secondary use: incentivizing good financial and civic behavior among citizens. Read more
  • Social credit data on citizens is primarily gathered by the government departments in each person’s city of residence. The local police, courts, tax bureau, citizen affairs office, department of education, health and family planning bureau, and many other bodies submit records on local residents to the National Credit Information Sharing Platform. These records are then included in each citizen’s social credit file.
  • Citizens can be blacklisted for failing to comply with court-ordered judgments, behaving badly on planes and trains, engaging in fraud, and other violations. Blacklisted citizens are publicly named and shamed. Read more
  • The central government is also using the social credit system to ensure lower levels of government are compliant with national directives, are paying their bills, and are meeting their policy targets. Read more