China pushing ahead with controversial corporate social credit rating system for 33 million firms

National Reform and Development Commission has completed its initial assessments, which will be used to label firms excellent, good, fair or poor

Foreign firms fear they will be targeted in the event of a trade dispute or to give domestic firms a commercial advantage

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China is now compiling an “unreliable entity” list to sanction foreign firms who hurt Chinese companies for non-commercial reasons, a response to sanctions from the United States against Chinese telecommunications equipment giant Huawei. Photo: AFP

Published: 6:00pm, 17 Sep 2019Updated: 6:43pm, 5 Nov 2019

China is moving forward rapidly its plans for a controversial social credit rating system that will include 33 million companies, raising fears of reprisals among foreign firms as Beijing seeks to extend its control over the business environment in the country.

The National Development and Reform Commission (NDRC) is pushing ahead with social credit-based supervision of all commercial entities from large firms to small, independently owned and operated business, prompting complaints over corporate privacy and heavy handed government intervention.

The social credit rating will include court rulings, tax records, environmental protection issues, government licensing, product quality, work safety and administrative punishments by market regulators.

Advocates argue that it will help create better corporate citizens, but critics say that it will give greater latitude to local officials to target certain firms.

In a circular released on Monday, the NDRC said it had completed its initial assessment of the credit results, which will now be sent back to local authorities for further checks and updates.

Firms will be labelled as having excellent, good, fair or a poor credit rating, with the initial assessment used as “basic proof” to allow the government to conduct varying degrees of supervision. For any business deemed to have a poor credit history, the management will be called in by local officials for a detailed review, which will include plans to correct the problems.

The NDRC has already completed its assessment of travel service companies, coal mining firms, long-distance bus providers, natural gas suppliers and home services.

According to the assessment of the coal sector published in April, only 98 of more than 19,000 firms were rated as excellent, while 1,868 were labelled as having poor social credit ratings. Some 204 natural gas suppliers were rated as poor after they appeared on the lists of the Supreme Court or the State Administration of Market Regulation for violating laws or regulations.