China’s corporate Social Credit System (SCS) combines 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. Here, we explain how to look up your company on this system.
The goal of this system is to make it easier for companies – and the authorities – to establish the trustworthiness and reliability of business partners. It provides both incentives for compliance (the prospect of being ‘red-listed’), and disincentives for non-compliance (going on either the irregularity list, or the ‘black-list’).
While the SCS has similarities with credit rating systems in other countries, it also has key differences and complexities which make it essential for you to understand this system well when operating within China.
In this article, we explain how to check the status of your company under the corporate SCS.
What Is the Corporate Social Credit System?
The corporate SCS sits alongside an SCS for individuals in China, in providing information and evaluations relevant to business activity. The corporate SCS is still in a development phase and will eventually result in a ‘Comprehensive Public Credit Rating’, which is aimed at completion later in 2020. That rating 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.
Important concepts in the corporate SCS include:
- Grades and ratings. Scores are currently in the development phase (these will be similar to the three-digit credit scores you may already be familiar with in other countries). However, there are four basic letter categories used: A= Excellent; B=Good; C=Average; D=Not sufficient;
- Red-List/Red-listing. This is a mechanism to reward companies that are performing well. For example, an export or import business may be identified as an ‘Advanced Certificate Enterprise’ and be granted special privileges, such as faster customs clearance. Similarly, privileges may be applied to A-rated taxpayers;
- Irregularity list. This lists companies with significant non-compliance. If a company is on this list, the authorities are paying attention to it;
- Black-listing. Black-listed companies are classified as heavily distrusted. This categorization can result in your business license being revoked;
- Unified Social Credit Code. This is your company’s unique business identifier across the different databases.
Below we look at how to check your status using a key national databases, CreditChina.
How to Check the Status or Rating of your Company using CreditChina
CreditChina is a search tool (only available from a `Chinese IP Address) providing a range of information on companies and individuals. Information incorporated into its assessments includes:
- Basic identifying information for the company, including the company’s 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 red-listed companies, one for black-listed 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:
Click on the ‘Credit’ tab (first item in the list)
Search for the company either by name, or by Unified Social Credit Code;
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 red-lists;
- The presence of the company on black-lists;
- The presence of the company on any irregularity list.
If you find ‘negative entries’ (presence on a black-list or irregularity list), 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.
How to Check the Status or Rating of your Company Using Other Databases
NECIPS is another national database, arguably not as user-friendly as CreditChina. It has the most comprehensive set of information on SCS records, as it collects data from the most government sources. In addition, NECIPS:
- Provides more comprehensive identification data relating to the company;
- Allows for reporting on SCS issues directly to the authorities.
In addition, companies should check local databases in the areas that they are located, as well as any subject matter-specific databases. These databases include:
- The tax database that lists when companies have excellent tax-filing and payment practices;
- The environmental regulatory database;
- A customs database;
- A procurement database.
Why Is the Corporate Social Credit System Important For Your Company?
The corporate SCS is important for two reasons. First, you need to know who you are doing business with. The SCS lets you look up potential business partners and collaborators and check their reliability. Second, understanding the SCS 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.
China has a corporate social credit system which provides information about the commercial and compliance activities of companies in China. This has some similarities with credit systems in other countries, but with a far more expansive set of data sources feeding into the evaluation and scoring.
Using the CreditChina search function is an important way to check the status of your business, but you also need to check a range of other databases that will be applicable to your particular business in the geographical area where it operates.
The most important thing you can do to protect your company from the consequences of a poor SCS evaluation or score is to ensure that you are in full compliance with all employment, labor, tax and other applicable laws.
Working with a local expert like New Horizons means you will know exactly which information you need to provide to authorities, and that you will have the assistance you need in submitting that information.
We can also be of assistance by conducting a compliance audit. This will identify any current areas for improvement. It may also be worth engaging us to carry out due diligence on any potential business partners.
Another possibility for improving your compliance is to transfer employer responsibilities to New Horizons via our China PEO & Employer of Record (EOR) platform. That way our in-house compliance and law teams can ensure that the business is fully compliant.