On October 30, the National Development and Reform Commission and the People’s Bank of China made initial steps to introduce fundamental changes to the black list and the red list systems.
The black list system and the red list system are two of the most important mechanisms to ensure compliance with legal obligations, technical standards, and contractual obligations by foreign and domestic enterprises, social organizations, administrative organs, and individuals.
Inclusion on the black list can produce consequences ranging from more frequent and more in-depth tax inspections, to the withdrawal of licenses with the ensuing exclusion from the market. As it occurs in several Western jurisdictions, blacklisting produces negative effects not only for enterprises and social organizations, but for individuals as well.
The ‘Guiding Opinion on Strengthening and Regulating the Management of the Lists of Joint Incentive Mechanisms for Keeping Trust, and Joint Punishment Mechanisms for Breaching Trust’ contains a long, complex, and highly technical list of measures to be adopted until December 31, 2020. These measures affect each and every aspect of the black and red list systems, including the collection of data, their disclosure, credit repair, and privacy protection.
Readers interested in knowing more about how the black list and red list systems will be reformed can access the original Chinese text of the Guiding Opinion here.
A summary of the main points of the Guiding Opinion has been prepared by the Xinhua News Agency, and it is translated below.
The State Confirms that Inclusion on the Credit “Red List and Black List” Will in Principle Follow a Unified National Standard
Xinhua News Agency, Beijing, November 3. On November 3, the National Development and Reform Commission stated that our country will regularize the management of subjects of joint incentive mechanisms for those who keep trust, and joint punishment mechanisms for those who breach trust (“the red list” and “the black list”). In principle, a national unified standard is to be used by all areas to compile the red list and the black list. The standard will be determined by units member of the Interministerial Joint Conference for the Construction of a Social Credit System, or by other professional departments of the state in accordance with the responsibilities of market supervision, social governance, and public service.
According to the “Guiding Opinion on Strengthening and Regulating Managements of the Lists of Joint Incentive Mechanisms for Keeping Trust, and Joint Punishment Mechanisms for Breaching Trust”, relevant provincial departments may introduce local standards as needed, but these shall be effective after examination by responsible departments at the next higher level, and by provincial People’s governments. During the drafting of assessment standards, the opinions of the broadest public shall be sought. Standards and the concrete assessment procedure shall be disclosed to the public through the Credit China website, and through other adequate methods.
The Opinion specifies that incentives and punishments are to be adopted in accordance with the lists, and it encourages the participation of societal forces. All social institutions are encouraged to query and use the red lists and black lists, to enforce market, industry, and societal restrictions and punishments on subjects on the black list, and to create “green channels” for subjects on the red list, providing them priority access to service provisions, optimizing arrangements on the supervision of trustworthiness in corporate governance, reducing market transaction costs, and promoting trustworthy market subjects.
According to the Opinion, a mechanism to withdraw from the black list of joint punishment for breaches of trust, and the red list of joint incentives for keeping trust shall be established. Where subjects have withdrawn from the black list or the red list, the department (or unit) responsible for the assessment shall promptly notify the withdrawal through the channels originally used to notify inclusion on either list. Relevant departments responsible for joint incentives or punishments shall cease enforcement. Relevant information included on the list will continue to be stored on the back end of the National Credit Information Sharing Platform, and credit service institutions may, according to relevant laws and regulations, continue to store records about breaches of trust for a definite period of time.