A national credit system could play a key role in China's economic
development. At last, the nation would be able to mitigate an
annual cost of some 590 billion yuan (US$71 billion) arising from
the present lack of such a system.
Zhang Xinze is director of the Statistics Department of the
People's Bank of China, China's central bank. He has announced
completion of a new report entitled "The Enterprise and Individual
Credit System." The report has been produced by the National
Enterprise and Individual Credit Special Group, which is sponsored
by the People's Bank. Assistance was provided by dozens of state
ministries and commissions including the State Economic and Trade
Commission, the Ministry of Public Security and the State
Administration of Industry and Commerce.
The report is currently at the consultative stage with public
response invited. Following consultation it will be submitted to
the governor of the People's Bank and the State Council, China's
cabinet, for review.
Experts in the field looking for huge annual cost savings, have
high hopes for the long sought after national credit system thought
necessary to play a key regulatory role in national economic
development.
Following State Council approval of the report, there would be a
trial period before the proposals would become promulgated as
law.
The report identifies the main components of the national credit
system as the legislation, the mechanism, the implementation plan
and the standards. For now, the state will not deal with specific
credit rating standards but rather leave those to the market. The
blueprint is for a national credit system operating at the macro
rather than at the detailed level.
Zhang Xinze said: "The factors influencing credit systems vary from
country to country. It will not be necessary to follow either the
US model described as 'the government builds the stage and the
enterprises put on the show' or the European model of '"the central
bank leads and government operates the system.'" In fact, all
countries still need to learn from each other.
"What can be confirmed at this time is that the credit system will
be operated in a manner appropriate to a market economy. The
government will not be the sole arbiter of credit ratings.
Moreover, the government will limit its role to one of providing
original credit data. The business of generating and providing
credit ratings will be a commercial activity carried out by the
organizations providing a credit rating service. Different credit
rating providers may use different indexes and rating methods so
credit rating reports from different sources may vary somewhat," he
said.
Zhang said, "The central bank will not unify the various crediting
rating standards now adopted by various commercial banks. It is the
individual commercial bank's own rating report that has the crucial
role. Credit ratings originating from other sources can only be
regarded as references."
According to Zhang Xinze, when commercial banks are considering
whether or not to grant loans to clients, they rely on an internal
credit rating established in accordance with the Basle Accord, the
international standard for assessing risk. They also take
cognisance of references provided by external credit rating
reports. The biggest market for the provision of credit ratings
still lies with the commercial banks.
Zhang Xinze was asked whether China will set up an individual
credit account, similar to the Social Security Number in the United
States. He said that the national credit system described in the
central bank report took a broad-brush approach to the mechanisms
of credit rating. It did not deal with the detail of specific
provisions for interaction among the banks, customs and taxation
authorities, public security departments and other state units.
Many ministries and state commissions are themselves preparing for
the national credit system. The Ministry of Public Security is
working on a new identity system that could unify a citizen's ID
number, passport number and driving license number. The national
taxation department is working on a "Bank-to-Tax" project aimed at
connecting the banks with taxation departments. However these moves
are not part of the central bank initiative.
Zhang Xinze said that the ministries and state commissions
establish their databases and collect information to meet the needs
of their internal systems and so improve efficiency. Each has an
information base specific to its own functions and not connected
with the national credit system proposed by the central bank.
Specialists in the field consider the development of a national
credit system to be an enormous project requiring a systematic
approach. It will depend upon coordination and cooperation among
state ministries, state commissions, enterprises and
individuals.
The plans for the national credit system mark the first step in the
long march to build up a comprehensive credit system to match the
systems of Western developed nations. Once the national credit
system has been established, it will make a significant
contribution to China's economic development. At last the nation
will have a means of tackling the abortive costs of around 590
billion yuan (US$71 billion) arising from credit risk.
(china.org.cn by Alex Xu, September 10, 2002)