Western Rating Agencies Allowed to Set Up in China

Editor’s Note: 

Over at the blog Law at the End of the Day, in a recent post 1 Larry Catà Backer observed how to “understand the construction of social credit in China one must look to patterns of” rules on FDIs relevant to credit investigation and rating services. A fundamental text, in this respect, is  Announcement No. 1 [2016] (available below) on foreign invested credit rating agencies.

The post further discussed how in China’s 2017 Catalogue for the Guidance of Foreign Invested Industries credit investigation and rating services have been moved from the ‘restricted’ to the ‘permitted’ category. The change in status of credit investigation and rating services has been in the making for quite some time.

The existing regulatory framework on credit rating makes only scant references to foreign invested credit rating services 2 Also, as it is well known, the 2015 People’s Bank of China Notice on Performing Well the Preparatory Work for the Credit Reporting Industry had delegated the task to construct the consumer credit rating industry to eight domestic agencies.

But, Announcement No. 1 [2016] interpreted the Administrative Regulations on the Credit Reporting Industry and the Measures on the Administration of Credit Reporting Institutions in a sense favorable to foreign invested credit investigation and rating services.

The changes in the Catalogue  come as the fulfillment of a long-held promise. What this will mean for the development of China’s social credit system, and for Western credit rating systems and agencies, it remains to be seen. Announcement No. 1 [2016] follows.

Announcement No. 1 [2016]

of the

Ministry of Commerce of the People’s Republic of China

[Issuing Unit] Ministry of Commerce of the People’s Republic of China

[Document Number] Announcement No. 1 [2016]

[Issuing Date] 20/1/2016

 

With the approval of the State Council, we hereby make the following announcement on matters relevant to the establishment of foreign invested credit reporting institutions:

The establishment and operations of individual credit reporting services by foreign invested credit reporting institutions shall conform to the provisions of article 6 of the “Administrative Regulations on the Credit Reporting Industry”, and to the “Measures on the Administration of Credit Reporting Institutions”. After obtaining prior permission from the People’s Bank of China, the applicant shall apply for approval of the business license for individual credit reporting to the Ministry of Commerce, and where such approval is granted, a certification of approval of foreign invested enterprises shall be issued.The applicant should, on the basis of the business license for individual credit reporting and the certification of approval of foreign invested enterprises, fulfill the registration procedure at the departments for industry and commerce.

The establishment of foreign invested credit reporting institutions providing enterprise credit reporting services shall be approved by relevant commerce departments at the provincial level. Where approval is granted, the applicant shall fulfill the registration procedure on the basis of the certification of approval of foreign invested enterprises, and put the registration on record at institutions equal or above to central branches of the People’s Bank of China based in the capital cities of provinces and autonomous regions, to be included in the scope of supervision by the People’s Bank of China.

The “Experimental Measures for Recording Foreign Investment in the Pilot Free Trade Zone” apply to the establishment of and changes in foreign invested credit reporting institutions based within the Pilot Free Trade Zone approved by the State Council, and the applicant shall fulfill relevant procedures by using the filing certification for foreign invested enterprises in lieu of the certification of approval of foreign invested enterprises.

Foreign invested credit reporting institutions shall provide their credit reporting services in accordance with provisions of the “Administrative Regulations on the Credit Reporting Industry”, and the “Measures on the Administration of Credit Reporting Institutions”, and they shall accept supervision by the competent departments.

The Present Announcement shall be effective from the date of its promulgation.

People’s Bank of China

Ministry of Commerce of the People’s Republic of China

January 20, 2016

  1. ”China’s Social Credit System and Foreign Direct Investment: Will Foreign Rating Agencies Help Build Chinese Social Credit Systems?”, 4 September 2017, available at http://lcbackerblog.blogspot.com/2017/09/chinas-social-credit-system-and-foreign.html
  2. See article 45, Administrative Regulations on the Credit Reporting Industry (Zhengxinye guanli tiaoli 征信业管理条例), issued on 21 January 2013 and effective from 15 March 2013.

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