Moscow, October 14 — “News. Economy.” Foreign companies are already experiencing difficulties in doing business in China, will face even more harsh reality because Beijing is stepping up plans to create a corporate rating system, writes the South China Morning Post.

Photo: EPA-EFE/ROMAN PILIPEY

The system of social credit will cover all commercial organizations regardless of their size. In determining the social ranking will take into account judicial decisions, tax reports, issues of environmental protection, state licensing, product quality, labor safety, and administrative penalties from regulators of the market.

As reported “Vesti. Economy”, a document published in September, the national Commission for development and reform Commission (NDRC) stated that it has completed the initial assessment of the results of rating that will be directed back to local authorities for further checks and updates.

The company will be labeled as having excellent, good, fair, or poor social rating, on the basis of which the government will set different degrees of supervision. Management of companies with a bad rating will be caused by local officials for a detailed analysis, which will include a plan to eliminate problems.

It is expected that all registered in China companies and individuals will eventually be covered by the system, which will be officially launched at the end of 2020.

For the evaluation of international companies, the program will analyze a variety of data, including business contracts, social responsibility, regulatory compliance and the number of Communist party members, whom they hire. The company has been blacklisted, can face penalties, including denial of access to cheap credit, higher taxes on imports and exports and a ban on travel from China key personnel.

Foreign companies will have to transfer to Beijing more data for verification. The possession of large amounts of data and powers under the sentencing will give the authorities even greater power in the maintenance of behavior under the law.

In the framework of the corporate and individual ratings are tied to each other. For example, if the company was punished for violation of the rules of business, the ratings of its key employees will also suffer and Vice versa.

In addition, the company’s rating will decrease if she does business with partners with a poor rating. This essentially eliminates the low rating from the supply chain. Because the technology program is still in the development stage, the full impact of system on business will only be known in a few years.

At stake are hundreds of billions of dollars, because many American corporations, including Apple, Boeing, Intel and Ford depend on the Chinese market. “The question for companies is what sort of data they need to provide. Right now they are still in the stage of understanding what this may entail,” said Dan Ives, an analyst with Wedbush technology in new York. According to him, if Beijing will push too hard, “it might be risky for China, if Apple and others start trying to move your business to other countries”.

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