A credit rating system for China's import-export traders is
being established to fill in the blanks in this field.
The?Ministry of
Commerce has authorized the Foreign Trade Enterprises
Association and the Beijing Guoshang International Credit Service
Ltd. to set up the system.
The two bodies have mapped out rating rules and set up the
Credit System Expert Committee. Ratings will be based on
information the ministry provides about international traders.
Association Chairman Zhang Xiaoli said there will be four grades
-- A, B, C and D -- with the initial ratings being published in the
press for public comment.
Companies will be rated according to 18 standards, including
brand recognition, quality certifications, license and quota
records, tax payments, adherence to intellectual property right
laws, total trade and financial strength.
This is the first concrete step toward establishing a credit
system for international traders. China is giving increasing
attention to the establishment of a credit-based business
environment.
The country has become the world's fourth largest trader, but
its trade credit system fails to match this standing, said Zhang.
The misbehavior of some traders, who are seldom punished, has had a
negative impact on China's reputation.
"The credit rating and archive we are providing can help foreign
companies better distinguish the bad from the good," Zhang
said.
The revision of nation's Foreign Trade Law that lowers the
threshold for foreign firms' involvement increases the need for a
comprehensive credit system for foreign trade, said Li Ling, vice
director of the ministry's Treaty and Law Department.
The revision, which will come into effect on July 1, allows
individuals to be the operators of export-import businesses and
removes some of the restrictive qualifications for international
traders.
The revised law includes articles for setting up a rating
system, such as establishing a statistics mechanism and publicizing
illegal operations.
The revision also strengthens sanctions against illegal
operations by adopting more severe punishments for violators,
including criminal and administrative penalties and cancellation of
traders' operating licenses.
The existing law allows only one penalty: withdrawal of
operational credit.
Li said the ministry will create regulations specifically
governing the credit system for international traders based on
these articles.
A company official from the Guangzhou Hongtai Industrial Co.
said the system will be very effective. Foreign companies often
encounter difficulties in assessing Chinese companies' credit,
which has sometimes caused them retreat. For example, he said, one
Japanese company signed an agreement with Guangzhou Hongtai only
after nine months of investigation.
"If there is an official credit-rating system, doing business
will be easier for those with good records," he said.
But analysts warn that while a credit system is badly needed,
the credibility of the system is even more vital. There is no
specific government department governing the establishment of a
credit system.
A number of government agencies, including the State Development
and Reform Commission, the Ministry of Commerce, the Ministry of
Public Security and the State Administration for Industry and
Commerce, are reportedly each drafting their own social credit
system plans.
For example, the ,
the nation's central bank, is building a huge Enterprise and
Individual Credit Management System that covers all of the bank
records of the nation's corporate and consumer borrowers.
As a result, many companies and organizations began to seek a
rating just to make a profit, and more than a few have a
"give-me-a-good-rating-and-tell-me-how-much-you-want" attitude
towards credit rating firms.
China's credit management industry is growing fast alongside the
rapid development of the market economy, but the estimated 500
credit management firms have been frustrated by the long absence of
an industry watchdog and related legislation.
(China Daily May 31, 2004)