The State Council Information Office held a regular press briefing at 3 p.m. on December 25, 2020 (Friday). Lian Weiliang, Vice Chairman of the National Development and Reform Commission (NDRC), and Chen Yulu, Deputy Governor of the People’s Bank of China (PBC), introduced what has been done to improve the mechanism for deterring acts of bad faith and to enhance the social credit system, and answered questions from the press. Selected transcript is as follows.
Chen Yulu: Dear friends from the press, the credit reference system is a core component of the social credit system, and the Central Committee of the Communist Party of China (CPC) and the State Council have attached great importance to the building of the credit reference system. Since the 18th CPC National Congress, resolutely implementing the decisions and arrangements made by the CPC Central Committee, the PBC has upheld the fundamental philosophy of facilitating credit reference services for the benefit of the people, pushed ahead with the development of China’s credit reference system in a market-oriented, law-based and technology-enabled way, and kept improving the mechanism for deterring acts of bad faith. The efforts delivered positive results.
At present, the National Financial Credit Information Basic Database, the establishment of which was led by the PBC, is the world’s largest credit reference system. Meanwhile, the commercial and consumer credit information collected independently by market-based credit reference agencies, namely the non-credit information, has also become an important component of China’s credit reference system. In terms of effects, the credit reference system has been playing an increasingly prominent role in preventing and defusing major financial risks, serving the real economy, improving the business environment and enhancing the public’s awareness of credit. As we know, the World Bank’s Doing Business report includes a credit-based index, namely the depth of credit information index. China has been given full credit for the index for four consecutive years. At the beginning of the year, the PBC launched the second-generation credit reference system, further improving its services, security and convenience. At the same time, in order to address the financing difficulties that many micro and small businesses (MSBs) short of credit records may face in their first financing attempt due to information asymmetry, the PBC has proactively encouraged the establishment of market-oriented credit reference platforms across China, guided market-based credit reference agencies to innovate their services, forged “Taizhou experience” in Zhejiang Province and “Suzhou experience” in Jiangsu Province by using non-credit alternative data, and applied the experience nationwide. All these endeavors have produced desirable results.
During the critical period of pandemic containment this year, adhering to the principle that the interests of the people come before all else, the PBC has tackled various difficulties faced by enterprises in their efforts to contain the pandemic and resume work and production and, in particular, contibuted to credit information services for facilitating the financing of micro, small and medium-sized enterprises (MSMEs). Up to now, the PBC’s credit reference system has exempted nearly RMB1 billion of charges and fees for credit report inquiries. The PBC’s platform for financing secured by receivables has helped MSMEs secure nearly RMB2 trillion of financing, more than doubling its annual target of RMB800 billion. Meanwhile, the PBC has also taken proactive measures to optimize and adjust credit reference policies, which effectively safeguarded the credit information rights and interests of four categories of people who are directly affected by the pandemic. The measures were warmly received by the public. Our international counterparts in charge of credit reference, such as those in the EU, the US and other countries, have learned from our experience.
Next, the PBC will thoroughly implement the guidelines of the Fifth Plenary Session of the 19th CPC Central Committee and the recent Central Economic Work Conference, and act in accordance with the arrangements made by the State Council executive meetings. We will stick to the rules of developing credit reference system, increase effective supply of credit reference services, optimize the market of credit reference services, further improve the mechanism for deterring acts of bad faith, and accelerate the building of a modern credit reference system adaptive to the digital era, so as to make due contributions to the high-quality economic and social development of China. This is my introduction. Questions are welcomed. Thank you.
Journalist with China News Service: The past few years have seen the rapid development of third-party credit reference agencies which provide credit information services for enterprises and individuals. Not long ago, the PBC made public its decision to issue the second license for personal credit information businesses for public scrutiny. Deputy Governor Chen, could you tell us how the PBC will foster and administrate the credit information market? Thanks.
Chen Yulu: Thank you. You have raised a very important issue. The credit information market indeed requires fostering, and it is the only way for a country to develop a modern credit reference system. Throughout the two-century history of the global credit information industry, the development patterns vary by countries and regions. Therefore, while drawing on international experience, we must take China’s credit culture as the basis to create our own development pattern of the credit information market. However, this needs in-depth and sustained exploration.
It is safe to say that after growing for more than a decade, China’s credit information market has been developing its own characteristics, and making greater contributions to serving the real economy and MSBs as well as enhancing the people’s awareness of integrity in the entire society. To be more specific, with the transition of the Chinese economy and society to high-quality development as well as the widespread application of new information technologies, more evidence shows that China’s credit information market will march into a golden era, which must not be missed. Therefore, to remain committed to market-oriented, law-based and science and technology-enabled development, we must regulate the market development while encouraging innovations, and promote the sharing of credit information services while strictly ensuring information security, especially the safety of personal information. To meet the higher demands for a modernized credit information industry, we need to cope with some new issues with regard to the development of the credit information market. They can be summarized in three aspects:
The first is to tighten regulation. Since the credit information business is centered on the information, which involves the protection of the people’s information rights and interests, we must put information security and the protection of rights and interests in the first place in our regulatory practices. In accordance with requirements laid out in laws and regulations such as the Civil Code and Regulations on the Administration of Credit Information Industry, the PBC will continue to improve the measures on the administration of credit information business, incorporate all information services aimed at serving financial and economic activities and used for assessing the credit status of enterprises and individuals into credit information regulation, and exercise licensing management. Any illegal engagement in credit information business will be investigated and punished in accordance with relevant laws and regulations. As was noted at the State Council executive meeting held on November 25 this year, we should advance the market access of personal credit reference agencies in a steady way. The second license for personal credit information business, as you have just mentioned, was granted based on this principle, and we will make sure that only licensed agencies can provide personal credit information services.
The second is to strengthen supply. While continuing to improve the PBC’s second- generation credit reporting system, we need to deepen the supply-side structural reform, guide private capital and other social forces to develop the market-oriented credit reference agencies in an orderly manner. We also need to achieve the inter-connectivity and information sharing among market-based credit reference agencies by means of the technologies of blockchain and big data and in market-oriented approaches, so as to facilitate the establishment of a comprehensive evaluation system for the credit status of enterprises. As part of the move to promote the high-quality integrated development of the Yangtze River Delta region, the PBC has been pushing forward credit information integration in the region. To be more specific, we are trying to realize credit information inter-connectivity among local market-based credit reference agencies through new technologies and rules, and have made encouraging progress in this regard. Meanwhile, we will stay committed to high-level opening-up and thus encourage open competition to increase high-level credit information supply, so as to enhance the international competitiveness of domestic credit reference agencies.
The third is to ensure security. We will ensure the security of the network environment and the technological architecture of various credit reporting systems. Besides, we will also take measures to enhance the protection of credit information, especially personal credit information.
The 14th Five-Year Plan period will be crucial to China’s economic transformation and high-quality development, as well as a golden period for the development of the credit information industry. We have every confidence to seize the opportunity and bring China’s credit information market to a new height. Thank you.
Journalist with Red Star News: For the time being, China’s individual credit system has yet to be well-established, and relevant departments sometimes find it difficult to fully grasp the financial status of individuals, which give rise to the phenomenon of maliciously escaping debts after enterprise bankruptcies. How to address this problem? Thank you.
Chen Yulu: This is an issue that concerns the public greatly. I’d like to invite Director-General Wan Cunzhi of the Credit Information System Bureau of the PBC to answer your question.
Wan Cunzhi: People are quite concerned about this issue. Currently, we are studying whether credit reporting systems could collect property-related information as much as possible to reflect individuals’ repayment ability and their credit status. The PBC, in line with the decisions and arrangements of the central authority, is striving to establish an all-inclusive credit reference system. Our goal is to realize the inter-connectivity and sharing of credit information among the financial sector, the government departments and relevant enterprise sectors with the support of new technologies.
The problem you put forward will be readily addressed with the gradual establishment and improvement of the all-inclusive credit reference system. During this process, since the collection of individual property information is restricted, according to the Regulation on the Administration of Credit Investigation Industry, credit investigation institutions shall be authorized to collect property information of an individual only after the individual concerned is clearly informed of possible consequences of such information collection and grants an explicit consent. The procedures will be carried out based on laws and regulations, so that property-related information will be collected in an appropriate manner and the credit status of individuals will be comprehensively assessed. Thank you.
Journalist with China Daily: Today, the abuse of personal information still widely exists in society. People are worried about privacy leakage. What measures will be taken to strengthen the protection of personal credit information in the future? Thank you.
Chen Yulu: The sharing and protection of credit information are two opposing ends, but we must integrate these two. Strengthening the protection of personal information and ensuring the security of credit information is the bottom line in our work on credit information, which relates to safeguarding people’s information rights and interests. The PBC has focused on the following four aspects in credit information regulation:
First, the PBC has required the Credit Reference Center to put data security at the forefront. Since the beginning of developing its credit reporting system, we have tried every means to organize a high-quality information security team. In the process of developing and upgrading the second-generation system, information security has also been put first. Therefore, data security has been continuously improved. The security performance of the system has been recognized by international counterparts and the World Bank delegation.
Second, the PBC has further strengthened the regulation of information security and personal information protection in the credit investigation market. On one hand, we have guided financial institutions to effectively protect customers’ personal financial information, regulated their business activities and strengthened their awareness of personal information protection and legal compliance. On the other hand, for financial institutions, credit investigation institutions, and relevant persons held accountable for information leakage or even illegal reselling of client data, severe punishment will be meted out in accordance with the law to form regulatory deterrent. In addition, the PBC has cooperated with relevant departments to crack down on the illegal purchase and sale of personal information in the name of big data companies or big data credit investigation, and to punish fraudulent behaviors in the name of credit information services and corporate credit reporting services.
Third, the PBC has vigorously carried out credit information publicity and education programs. Nowadays, some people say they can clean up credit reports or remove bad credit records for others. Vigorous publicity programs must be conducted to expose these online scams, so as to help the people avoid being defrauded.
Fourth, the PBC has continuously improved credit information rules and regulations to consolidate legal base for the protection of personal information. China is formulating a law on personal information protection and a law on data security. In 2013, the State Council promulgated the Regulation on the Administration of Credit Investigation Industry for implementation, which gave information subjects the rights to know, consent, raise dispute and file complaint. That made a milestone in protecting the legitimate rights and interests of information subjects.
Next, we will introduce the Interim Measures on the Protection of Personal Financial Information in due course based on the upcoming laws such as the law on personal information protection and the law on data security. We will enhance our efforts to ensure legal use of personal information in the financial area, and to effectively safeguard the legitimate rights and interests of information subjects. Thank you.
Journalist with CCTV Business Channel, China Central Television, China Media Group: We have noticed that the default of corporate debenture bonds in the bond market recently caused widespread concern in the market. What measures will be forthcoming in cracking down on “evading debts” and ensuring the rule of law in the bond market? Thank you.
Chen Yulu: Since the beginning of this year, the bond market has been generally stable. Recently, a very small number of bond issuers have defaulted in the interbank bond market, triggering some fluctuations in the bond market. At present, stability has been restored and investors are becoming more rational. Objectively speaking, bond defaults reflect that rigid payment has been broken in the development of the bond market. Through the test of default data, a competitive mechanism for the survival of the fittest can be formed in the bond market. This is conducive to credit building in China’s financial market. However, in this process, we must be highly vigilant against the disclosure of false information by defaulting enterprises, or other illegal activities like fraudulent issuance and even “evading debts”. Such conducts will have a devastating effect on the social environment and the credit quality of the financial market.
Next, the PBC will work with the NDRC, CSRC and other relevant departments to fulfill regulatory responsibilities, further strengthen the rule of law in the bond market, tighten market discipline, and crack down on various violations of laws and regulations. At the same time, we will also strengthen the information disclosure requirements, and improve the credit constraint mechanism and credit rating system, so as to enable healthier development of the credit system of the financial market, especially the bond market. Thank you.
Journalist with Economic Daily: The regulators have been working hard to promote the financing of MSMEs, and the credit information is an important part of MSBs financing. May I ask what measures the PBC will take to improve the financing and credit information services for MSBs? Thank you.
Chen Yulu: You’ve mentioned a prominent and core issue. To promote MSBs financing, I believe the most fundamental thing is to solve the problem of information asymmetry. In other words, before lending to MSBs, financial institutions need to use various information to judge whether the principal and interest can eventually be repaid on schedule. Credit information is an important means to solve or alleviate information asymmetry. To tackle this major issue, the PBC has concentrated on three aspects in improving the financing and credit information services for MSBs in accordance with the arrangements of the CPC Central Committee and the State Council.
First, we have given full play to the fundamental role of the PBC’s credit reporting systems in effectively alleviating the financing difficulties of MSBs. As is shown by the statistics, MSBs account for as much as 60 percent of the total number of inquiries in the credit reporting systems of the PBC, and therefore are the biggest beneficiaries of the credit reporting systems. During the pandemic of this year, the PBC’s credit reporting system has reduced and waived inquiry fees by nearly RMB1 billion, of which nearly 60 percent was enjoyed by more than 2.7 million MSBs.
Second, through the establishment of a platform for financing secured by receivables and a unified registration and publicity system for financing secured by chattel, the financing costs of MSBs have been effectively reduced. To assist MSBs in the supply chain with financing, the PBC began to establish the platform for financing secured by receivables in 2013, mainly to provide registration services for confirmation of account receivables pledge of MSBs’ online supply chain financing. Since the beginning of this year, this platform has contributed nearly RMB2 trillion to MSMEs financing, and the size of financing realized through the platform is still growing continuously and rapidly. I should say that, its support for MSMEs financing during the pandemic has been more than expected. On January 1, 2021, upon the approval of the State Council, the unified registration system for financing secured by chattel will be officially launched nationwide. In accordance with the Civil Code, the PBC will provide better services of chattel pledge and guarantee of rights for MSBs in a wider range and broader fields.
Third, new technologies and alternative data are used to guide market-oriented credit investigation institutions to innovate the models of credit information services and deepen credit information services for MSBs. The World Bank defines alternative data as credit data other than borrowing information. Using alternative data to profile the credit status of enterprises and individuals is a new trend that has emerged worldwide in recent years. The main background to this is the wide application of Internet platforms and big data technology, which makes it possible to collect a large number of valid alternative data. Many MSBs were originally “blank accounts” or “quasi-blank accounts” with regard to credit information when they had no borrowing information. Under these circumstances, the credit information supply through valid alternative data will make it possible for a great number of such MSBs to obtain financing. Moreover, these market-oriented credit investigation institutions that provide alternative data can further realize the inter-connectivity of credit information through new technologies such as blockchain, and thus help MSBs to obtain credit information services in a timely manner. This will be a greater contribution. This vision is highly likely to become reality. As mentioned earlier, with the Yangtze River Delta as the base, we are effectively advancing this initiative.
Looking into the future, we believe that more and more MSBs will receive better and higher-quality credit information services and financing support through these three integrated approaches. Thank you.
