China’s credit system implements carrot and stick policy with telling effect

By: | Updated: April 3, 2017 3:48 PM

China is moving forward with the introduction of an ambitious social credit system to curb all the firms that do not abide the law.

China, credit system rewards, social credit system, China’s National Development and Reform Commission, China NDRC, General Administration of Customs, GAC, People’s Bank of ChinaPhoto for representation only. (Reuters)

China is moving forward with the introduction of an ambitious social credit system rewards to curb all the firms that do not abide the law. This system will reward all those companies that are practicing good business as per the government, but companies that try to find ways around the law will be punished. The rewards that will be given to the companies include fewer inspections, faster clearances, better facilities but the harsh measures will be taken against the defaulters.

According to the data from China’s National Development and Reform Commission (NDRC), the Chinese government blacklisted 6.73 million individuals after introduction of the system in in 2013. This list includes the names of 6.15 million individuals that were restricted from buying air tickets, those that have been restricted from buying high-speed rail tickets and 555,000 individuals that were restricted from securing loans and credit cards to the tune of approximately Rs 6,500 crore, according to an Indian Express report.

You may also want to watch-

According to China’s General Administration of Customs (GAC), 33 government authorities including provincial governments and municipalities, the People’s Bank of China have jointly signed a memorandum of cooperation to the effect of the latest upgrade in the social credit system. GAC Vice Minister Li Guo while talking about the steps that will be taken against fraud companies said, “In order to combat false trade data, these joint disciplinary measures will be applied to companies that report fake trade data, which leads to statistical distortions. Based on the national credit information sharing platform, data exchange about discredited enterprises can be realised.” He further said, “China’s export and import trade grew by 20.2 per cent last year and tax revenue increased as well. We do understand that there are uncertainties in business, but the GAC is working hard and considering many factors.”

You may also want to watch-

While talking about the good companies and the defaulters, he said, “Good companies deserve better facilities, lower inspection rates and convenient clearances. This will enhance competition and send a signal to others that good credit is conducive to business.” He then talked about the punishment to the defaulters and said, “Punishment should be severe enough to feel the pain and deter them from doing it again. They will have to comply with strict standards to erase the label.”

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition