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Central bank report on the credit information system since 2017
"The collection of personal credit information follows the principle of 'minimum and necessary,' and activities unrelated to personal credit are not included in the credit information system."
…what are the facts relating to China’s Social Credit System (SoCS)? First, a system does exist, but it is very different from what is imagined by many critics outside China. The biggest disconnect is around the notion of scores. Some commentators seem to imagine that a magic algorithm draws from AI cameras and internet surveillance all over the country to calculate a score that determines everyone’s place in society. In reality, the SoCS is not the techno-dystopian nightmare we fear: it is lowly digitalized, highly fragmented, and primarily focuses on businesses. Most importantly, such a score simply does not exist.
Today Pekingnology translates a recent report by the credit bureau of the People’s Bank of China on one significant part of the Social Credit System.
Essentially, China’s central bank maintains one 金融信用信息基础数据库 basic financial credit information database, which it also calls the 央行征信系统 central bank credit information system, and licenses non-state, for-profit entities in assessing personal and corporate credit information for financial services.
The central bank credit information system is made up of two systems: 个人征信系统 personal credit information system for individuals and the 企业征信系统 enterprise credit information system for companies. Basically, it gathers information similar to what FICO does but does NOT assess the information (the central bank via the Bank of China), including NOT giving a score or establishing a “blacklist”
Q: Does the People's Bank of China credit system have a "blacklist"?
A: The credit information center of the People's Bank of China does not have a "blacklist” The credit center only collects and displays customers' credit information objectively and does not make any evaluation of the customer information.
More importantly, as you will read below,
Credit report inquiries to the central bank credit information system have become a necessary procedure of the lending business for financial institutions.
The collection of personal credit information follows the principle of "minimum and necessary,” and activities unrelated to personal credit are not included in the credit information system.
If there needs to be one takeaway: the central bank’s part of China’s Social Credit System is multiple databases that each functions like FICO without scoring companies or individuals and aim solely to facilitate financing.
Building a Credit Information System Covering the Whole Society
Ever since the 19th National Congress of the Communist Party of China (2017), the People's Bank of China (PBoC) has firmly implemented the significant decisions and deployment of the Central Committee of the Party and the State Council on building credit information systems, focusing on perfecting the long-term mechanism for 诚信建设 promoting integrity and credibility in society, improving the credit information system covering the whole society, upgrading the quality of credit information services, protecting the rights and interests of information subjects, and promoting the high-quality development of China's credit information industry.
1. Stick to the "government and market" double-wheel-driven development
The PBoC adhered to the "government and market" double-wheel-driven development model. It gradually built a pattern in which the basic financial credit information database (hereinafter referred to as the central bank credit information system) and private credit information providers developed in concert and complemented each other.
1.1 The central bank credit information system ranks among the world's best
The central bank credit information system, constructed under the leadership of the central bank and based on the comprehensive sharing and application of personal and corporate credit information nationwide, has become the largest credit information system in the world which covers the largest population and collects the most comprehensive types of credit information.
As of the end of August 2022, the 个人征信系统 personal credit information system [Pekingnology: part of the central bank credit information system] was linked with 4,081 financial institutions and covered the information of 1.15 billion natural persons, providing 10.844 million inquiries per day on average. The 企业征信系统 enterprise credit information system [Pekingnology: part of the central bank credit information system] was linked with 3,811 financial institutions. It covered the information of 98.746 million enterprises and organizations. It provides inquiry services 273,000 times per day on average.
Credit information inquiries to the central bank credit information system have become a necessary procedure of the lending business for financial institutions. In the World Bank's "Doing Business Report,” which took the database as the major assessment object, China had received full marks on the report’s credit information index for five consecutive years, ranking among the best in the world.
1.2 Market-oriented credit information providers meet diverse credit information needs.
Firstly, following the principle of "third-party independence, objectivity and impartiality, and protection of the rights and interests of individual privacy,” market-oriented personal credit information providers developed. The PBoC had approved the establishment of two of them, namely 百行征信 Baihang Credit and 朴道征信 Pudao Credit, in sequence. By the end of August 2022, Baihang Credit and Pudao Credit respectively covered 496 million and 157 million people, with services provided for 3.859 billion and 1.013 billion times, respectively. That means a comprehensive sharing and application of massive 非贷替代数据 alternative personal non-lending data.
Secondly, following the principle of "having stable data sources, advanced information processing technology, and actual demand from the market,” the central bank licensed corporate credit information providers. By the end of August 2022, 136 of them had registered with branches of the People's Bank of China. Their services cover all public information, such as corporate registration information. Credit information services, including credit scoring, anti-fraud, corporate imaging, joint modeling, decision support, and other credit information products had been provided 5.2 billion times in the first eight months of 2022 alone.
Thirdly, following the principle of "high standard, market-oriented and internationalization," internationally competitive credit rating agencies were cultivated. By the end of August 2022, there were 55 registered rating agencies nationwide. Well-known foreign rating agencies such as S&P and FitchRatings entered the Chinese market in the form of wholly foreign-owned enterprises. While "bringing in (international rating agencies)," China's local credit rating agencies were also gradually "going out" with improved international impact. China has now formed a rating market where large-scale credit rating agencies for the bond market stand at its core, supplemented by credit rating agencies in the small-amount lending market, with rating agencies of the state, private, and joint ownership co-existing. The comprehensive strength of the rating market is increasing.
2. Firmly protect the legitimate rights and interests of information subjects.
Personal credit information relates to personal privacy and the security of properties. Corporate credit information is a matter of corporate commercial secrets and market competitiveness. With the rule of law being emphasized and supervision being strict, the PBoC adhered to the 征信为民 "credit for the people" principle, improved the compliance of the credit information industry, and effectively protected the legitimate rights and interests of information subjects.
2.1 Improve the system governing credit information.
The "Interim Measures for the Administration of the Credit Rating Industry" was issued in conjunction with the National Development and Reform Commission, the Ministry of Finance, and the China Securities Regulatory Commission, to align with international standards in strengthening external supervision, improving market transparency, promoting fair competition in the industry, strengthening accountability and other aspects, and enabling credit rating to play its role in risk disclosure and risk pricing.
The "Measures for the Administration of the Credit Reporting Business" was issued to clarify the boundaries of credit information business, to strengthen the protection of the rights and interests of information subjects, to incorporate the new mode of personal credit information business into the supervision of the credit information industry in accordance with the law, to effectively protect the legitimate rights, interests, and the information security of the natural persons and entities in the credit rating market, and to promote the regulated and orderly development of the credit information industry.
2.2 Focus on protecting individual privacy.
The collection of personal credit information follows the principle of "minimum and necessary,” and activities unrelated to personal credit are not included in the credit information system. We protect the information subject's right to know, consent, object, and complain. Consent from the information subject must be obtained before querying personal credit information reports. The general public can inquire about their own credit reports from the central bank credit information system through multiple channels such as the People's Bank of China counters, self-service inquiry equipment, Internet, online banking, and mobile banking. The information subject has the right to raise objections and file complaints over erroneous information and inaccurate credit violation.
2.3 Fully embody the principle of "people-oriented.”
Special policies were adopted for specific groups of people affected by the COVID-19 pandemic, so pandemic-caused defaults do not taint personal credit information records. The policies have benefited 24,859,000 individuals and 1,468,000 enterprises.
The publicity campaign 6.14信用记录关爱日 “June 14 Credit Record Care Day" was launched. We campaigned intensively against the so-called "credit information repairment" (scams), leading to serious investigation of fraud and false propaganda. The credit information market environment was cleaned, and the awareness of information subjects to protect their rights climbed.
3. Promote servicing the financing of small and micro enterprises as an emphasis in credit information services.
The PBoC took full advantage of 征信平台 credit information platforms to ensure the interconnection of enterprise-related information between different departments and regions and to solve problems like the lack of collaterals in loans and the uncontrollable risks caused by the unavailability of information [Pekingnology: which plagues the financing of small and micro enterprises.]
3.1 Promote the establishment of local credit information platforms and realize the sharing and application of enterprise-related information.
Accessibility to financing for small and micro enterprises has been greatly improved, underpinned by regional platforms, which aggregate and share non-lending information and provide financing services for small and micro enterprises.
By the end of August 2022, more than 40 local credit information platforms have been established, recording information about 90.49 million enterprises and being available for 3,280 financial institutions. They provided query services 81.70 million times, facilitating a total of 3.41 trillion RMB loans for 906,600 enterprises and 60% of the enterprises were getting their first loan.
To solve the cross-regional financing and operation problems encountered by small and micro enterprises, since 2021, the People's Bank of China has established a cross-regional integrated credit information alliance chain between local credit information platforms. Now, the "Yangtze River Delta Credit Information Chain," "Pearl River Delta Credit Information Chain," and "Beijing-Tianjin-Hebei Credit Information Chain" have been established, and 251 million pieces of credit information were available in the chains by the end of August 2022.
3.2 We built a unified registration system of guarantee over chattels and rights to effectively revitalize the chattels of small and micro enterprises.
The online registration and query of guarantee over chattels and rights cover production equipment, raw materials, semi-finished products, products, accounts receivable, copyrights, etc., have been realized nationwide.
The online registration and query of some chattels, such as living organisms, crops, farmers' rights to operate bed & breakfast services, and carbon emission allowances have been realized in some regions, further improving the efficiency of financing for guarantee over chattels and right, thus facilitating companies’ financing.
By the end of August 2022, the unified registration system had 85,000 registered users, 19.36 million registrations, and 134 million inquiries.
3.3 Expand the application scope of the accounts receivable financing service platform and solve the problem of accounts receivable confirmation.
The functions of the 应收账款融资服务平台 accounts receivable financing service platform have been continuously expanding to realize the confirmation of accounts payable of major enterprises, the rapid interaction of information on winning bids and contracts in government procurement, governmental finance payment information, and transaction information. That helps small and micro enterprises to secure financing based on their accounts receivable in major enterprises and government finance departments.
By the end of August 2022, the accounts receivable financing service platform has incorporated 207 major enterprises, 53 government finance departments, and 73 banks, supporting 100,000 enterprises and individuals to obtain financing in 379,000 transactions, amounting to 17.1 trillion yuan.
4. We will promote the sustainable, high-quality development of China's credit information industry in the new era.
Guided by the Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the PBoC will further build and improve the credit information system covering the whole society and provide high-quality credit information services for economic and social development.
Firstly, we will adhere to the goal of full coverage of credit information. Promote the sharing and application of personal and corporate credit information in different fields and on different platforms; interoperate different credit information systems; establish a "credit information file" for each economic entity, and meet the multi-level and diversified credit information servicing needs in the economy and society.
Secondly, we will adhere to the principle of 征信为民 "credit for the people" to protect information subjects' legitimate rights and interests. Promote the further perfection of relevant laws and regulations; balance the relationship between the compliant use of credit information and effective protection (of information); strengthen industry supervision, and seriously investigate and deal with abusive mining and use of personal information and other violations.
Thirdly, we will adhere to the direction of marketization, legalization, and internationalization for the credit information industry. Foster diversified markets for credit information services, multi-dimensional credit information products, and multi-channel credit information services. Promote cross-border credit information cooperation, cultivate credit information providers and rating agencies with international competitiveness, and serve the national strategy of opening up to the outside world. (Enditem)
If you are as into China’s central banking as Pekingnology apparently is, you are welcome to check out a series of translations of their de facto work reports since 2017 - and yes, this is the last one.