China’s Corporate Social Credit System (CSCS) is a system that evaluates and scores the trustworthiness of businesses operating within the country. It gathers data from various sources, including government agencies, courts, and even public opinion, to create a comprehensive assessment of a company’s behaviour. This score can significantly impact a company’s reputation, access to financing, and ability to conduct business in China. While proponents argue it promotes transparency and compliance, concerns remain about its potential for misuse and the lack of clear guidelines.
Corporate Social Credit System (CSCS) Services
- Company public credit profile review: Our public credit profile review includes financial due diligence, a report on the company’s legal status including available data on the Chinese subsidiary, a review of major national blacklists, an examination of relevant company ratings, and third-party public credit profile reviews.
- Company financial review: A company financial review can include reviewing the local financial report in all material aspects, in accordance with the applicable financial framework, reviewing a selection of sample transactions (revenue, costs, expenses, assets, AR/AP) for accuracy and effectiveness, reviewing whether special transactions (i.e., to a related party or overseas payments) are booked correctly, reviewing declarations of VAT, CIT, and other relevant taxes (i.e., surtaxes and withholding taxes) and reviewing IIT, Social Security, and Housing Fund declarations.
- Credit restoration: Upon discovery of low social credit scores or blacklisting, our team helps to rectify outstanding compliance issues and supports to apply for credit restoration with relevant authorities.
- Partner Due Diligence: Mitigate risk in your China supply chain by vetting suppliers and distributors through the Corporate Social Credit System (CSCS).
Benefits of our CSCS Services
- Interdisciplinary: Our team of tax advisors, supported by legal experts, can effectively advise you on best practices and, in the worst-case scenario, assist you in restoring your credit.
- Fast: We possess the knowledge, experience, and all the necessary tools to quickly assess your company and get it back on track.
- Cost-Effective: Our proven processes ensure efficiency, minimizing both our time and your costs.
- Communication: Your trilingual account manager will serve as your primary contact with our team and local authorities, ensuring clear communication and preventing any misunderstandings.
What is China’s Corporate Social Credit System (CSCS)?
China’s developing Corporate Social Credit System (CSCS) aims to create a comprehensive, searchable database evaluating company trustworthiness. While the broader social credit system is universal, the CSCS is its current focus, with the majority of policy documents related to corporate application.
The goal is a “Comprehensive Public Credit Rating,” though currently, businesses are assessed using various national, regional, and industry-specific databases. Over 33 million businesses have already been evaluated based on compliance, financial, and audit records. Key CSCS elements include letter grades (A-D, with A being excellent), “Redlists” for well-performing companies, “Irregularity Lists” for companies requiring scrutiny, “Blacklists” for heavily distrusted companies that risk losing their business license, and the Unified Social Credit Code, a unique business identifier used across all databases.
Does the CSCS apply to foreign companies in China?
Whether a foreign individual has a social credit score depends on their involvement with a business entity in China. If they operate or work for a registered Chinese business, such as a Wholly Foreign-Owned Enterprise (WFOE), that entity may have a corporate social credit score, depending on its location and industry. It’s important to note that corporate social credit scores currently apply only to businesses registered in China, including subsidiaries, branches, and joint ventures (JV).
What is CreditChina?
CreditChina, accessible only from a Chinese IP address, is a search tool offering information on companies and individuals. This information includes basic identifying details like the company’s Unified Social Credit Code and permits held, as well as any applicable administrative penalties, payment defaults recognized by the courts, instances of tax evasion and fraud, illegal importing or exporting, and unpaid wages.
