China extends its social credit system to businesses

A factory in Zhuhai, China. (Wikimedia)

The Chinese government has begun to expand its burgeoning social credit system to rate individual businesses. The government said that it will rate any firm operating in the country, including those based in America and Europe.

The credit system compiles records like payroll data, environmental records and employee political affiliations, many of which are stored across government agencies and industry groups. The system will then apply a rating between 1 and 4, with 1 being the best. The country's economic planning agency announced in September that it has already rated 33 million firms.

In a September 22 article, the New York Times reported that the Chinese government has used the rating system as a political tool:

United, Delta and American received letters last year from Chinese aviation officials saying their social credit score could be hit unless their websites labeled Macau, Hong Kong and Taiwan as part of China. Lower scores would lead to investigations, the possibility of frozen bank accounts, limitations on local employees’ movement and other punishments, according to a letter sent to United and seen by The New York Times.

The increased industry scrutiny, however, could help make China a fairer place for foreign businesses, according to the European Chamber of Commerce:

In some respects, this is good news. Equal enforcement of regulations should become a reality as numbers are crunched by impartial algorithms, before the system then pumps out a rating for each individual firm.

In the same report, the ECC described the corporate social credit system as a modern replacement to joint venture programs, which required foreign companies to enter into joint ventures with Chinese firms in order to operate in the country.

"The [corporate social credit score] is emerging in the background to enhance the government’s ability to steer companies' behaviour," the report writes.

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