The credit rating campaign for 2006 targeting China's foreign
trade companies formally got underway on Monday, the Ministry of
Commerce has announced.
Initiated by the China Shippers Association (CSA), which is
under the ministry's jurisdiction, the campaign is designed to stem
business fraud and establish a sound credit system in the foreign
trade sector, said a circular.
Due to lack of a credit rating system, the level of bad debts of
some Chinese foreign trade companies was as much as 30 percent
which is far higher than the average 0.25 to 0.5 percent of their
western counterparts, said Chen Xinnian, director of the
Consumption Research Office of the Economy Institute of the State
Development and Reform Commission.
Calling credit rating an "urgent task" Chen said that only after
a nationwide system consistent with international practices was
established could domestic companies cut their transaction costs
and trade risks.
The circular says that domestic companies in the import and
export business should submit their credit records by December 31
to the Beijing International Business and Credit Assessment Company
(IBD-Credit) for preliminary evaluation.
The IBD-Credit, with authorization from the ministry, will make
quantitative analysis on the financial health of a company
including its assets, profitability, solvency, cash flow, operating
efficiency and growth potential.
An expert panel affiliated to the CSA would then review the
preliminary rating results and base their final judgment on a
comprehensive evaluation of the records from departments like the
customs, taxation, industry and commerce and banks
Since the first such campaign got underway in 2004 nearly 1,000
companies have had their credit status rated. The rating is valid
for five years and requires an annual review, says the
circular.
(Xinhua News Agency June 6, 2006)