Less than a month after the 19th Congress of the CCP, China has decided to extend monitoring and rating mechanisms to all legal entities involved in transnational economic cooperation. The announcement came through a document enacted by 28 Party organs, State ministries, and commissions, and available in our database.
Entitled ‘Guiding Opinions on Strengthening the Construction of a Credit System in the Field of Economic Cooperation’, the document has the goals to improve enterprise responsibility systems, regulate participation to transnational economic cooperation, and promote competition.
Monitoring and rating mechanisms that will be used on legal entities will be operated through public-private partnerships.They will involve the use of big data technology to gather information about:
compliance with reporting obligations, domestic and foreign regulation, international treaties, and UN resolutions by legal entities, their legally responsible persons, contractors, and partners providing labor force;
tax evasion, money laundering, terrorist financing, and other financial crimes committed by legal entities and their legally responsible persons;
financial crimes committed by legal entities and their responsible persons in the field of international trade, and the production of sub-standard commodities
Which Information Will be Gathered?
According to the Opinions, information to be collected will include “basic information about enterprises, “basic information about international economic cooperation”, information about violations of laws and regulations, as well as administrative or criminal punishment received by enterprises and their responsible persons.
Also known as ‘credit information’, these data will be compiled in enterprise dossiers, and used to rank enterprises and their management. Information about the rating system to be applied to individuals and enterprises involved in transnational economic cooperation is not yet available.
Some of the information that will be included in enterprise and management’s dossiers is already public. An example is given by criminal punishments received by managers and by corporations, which are accessible through the databases maintained by the People’s Courts.
Besides big data technologies, data collection will be facilitated through a multi-stakeholder process involving government departments, enterprises, industry associations, and the public broadly understood.
How Will Information Be Used?
Information will be shared through the National Enterprise Credit Information Publicity System, and disclosed through the ‘Credit China’ website. The National Enterprise Credit Information Publicity System already allows public access to general information about enterprises and any administrative or criminal punishments they may have received. The sample entry below for the car manufacturer GAC FCA, a joint venture between FIAT Chrysler and the Guangzhou Automobile Group – gives an idea of what information can already be consulted by the public.
In this case, FIAT Chrysler’s public credit record is clean: neither the company nor its managers received any administrative punishment. The same observation may not apply to other legal entities.
Information included in records of legal entities maintained by administrative organs is of course much broader.
Both the information disclosed through the Credit Information Publicity System and those collected by government organs will be used to rate enterprises and their management, and adopt punishments and incentives.
Punishment and incentives will be specified in Memoranda of Understanding. While a MOU specific to transnational economic cooperation has not been issued yet, several of the original documents available on this website – here, here and here – illustrate the range of limitations and punishments legal entities may suffer. Limitations and punishments can vary from receiving more frequent inspections, to the cancellation of business licences.