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First step taken towards credit system
By Dai Yan (China Daily)
Updated: 2004-05-31 08:33
A credit rating system for China's import-export traders is being established
to fill in the blanks in this field.
The Ministry of Commerce has authorized the Foreign Trade Enterprises
Association and the Beijing Guoshang International Credit Service Ltd to set up
the system, which will greatly facilitate the overall business environment.
The two bodies have mapped out rating rules and set up the Credit System
Expert Committee.
They will give the ratings based on foreign traders' information provided by
the ministry.
Association Chairman Zhang Xiaoli said there will be four rates - A, B, C and
D - with the initial ratings being published in the press for public comment.
The rating will be marked according to 18 standards, such as the company's
brand recognition, its quality certification, its record in the use of licences
and quotas, its record in tax payment, its legal use of intellectual property
rights, its trade volume and its financial strength.
It marks the first concrete step toward establishing a credit system for
foreign traders as the country is putting increasing importance on establishing
a credit-based business environment.
China has become the world's fourth largest trader, but its trade credit
system fails to match this standing, said Zhang.
The misbehaviour of some traders, who are seldom punished, has had a negative
impact on China's reputation.
"The credit rating and archive we are providing can help foreign companies
better distinguish the bad from the good," Zhang said.
Revision of nation's Foreign Trade Law, which lowers the threshold for
foreign firms' involvement, increases the need for a comprehensive credit system
for foreign trade, said Li Ling, vice-director of the ministry's treaty and law
department.
The law, which will come into force on July 1, allows individuals to be the
operators of export-import business and removes some restrictive qualifications
on foreign trader.
Li said the revised law has added articles for setting up a rating system.
For example, the revised law said there should be a statistics mechanism and
illegal operations ought to be publicized.
The revised law strengthens sanctions against illegal operations through
adopting more severe punishments, from criminal penalties to administrative
penalties and cancellation of operators' qualifications.
The old law had only one punishment - withdrawal of operational credit.
Li said the ministry will stipulate a specific regulation governing the
credit system of foreign traders based on these articles.
A company official from the Guangzhou Hongtai Industrial Co Ltd, which is
taking part in the rating, welcomed the system, saying it will be very
effective.
Foreign companies often encounter difficulties in assessing Chinese
companies' credit, which has sometimes made them retreat, he said.
For example, he said a Japanese company signed an agreement with the company
after nine months of investigation.
"If there is an official credit-rating system, doing business will be easier
for those with good records," he said.
But analysts warned that when a social credit system is badly needed in
China, the credit of the system is even more vital. There is no specific
government department governing the establishment of a social credit system in
China.
A number of government agencies, including the State Development and Reform
Commission, the Ministry of Commerce, the Ministry of Public Security and the
State Administration for Industry and Commerce, are reportedly drafting their
own social credit system plans.
For example, the People's Bank of China, the nation's central bank, is
building a huge Enterprise and Individual Credit Management System that covers
all of the bank records of the nation's corporate and consumer credit borrowers.
As a result, many companies and organizations began to do this just to make a
profit and many companies have a
"gimme-a-good-rating-and-tell-me-how-much-you-want" attitude towards credit
rating firms.
China's credit management industry is growing fast alongside the rapid
development of the market economy, but the estimated 500 credit management firms
have been frustrated by the long absence of an industry watchdog and related
legislation.
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