Nothing about credit is trivial, as one could achieve nothing without it. In our daily life, without credit information, one cannot use credit cards, or apply for loans or corporate financing. Credit record, an “economic identity card”, has become increasingly vital. What is credit reporting, and how should the general public properly understand it? Xinhua Net has invited Zhang Zihong, Deputy Director-General of the Credit Information System Bureau of the People’s Bank of China (PBC), to thoroughly elaborate on the importance of credit information.
Zhang Zihong: Dating back to the 1990s, China’s credit reporting system can be briefly introduced from four aspects--the starting, exploring the rapid development of marketization, introducing the concept of personal information protection, and gradually opening up the market.
The stage of starting was marked by the inception of the system of loan certificates in some regions where the economic system reform and opening up policy was launched in the last century. To assess risks in foreign trade, there were credit rating agencies that were founded at that time. As technology advanced, the loan certificates in paper form developed into “the bank credit registration and consultation system”, which was later networked nationwide in 2002.
The second stage featured improvement. From 2003, we started drafting the Regulations on Credit Reporting Industry. The Third Plenary Session of the 16th Central Committee of the Communist Party of China (CPC) provided a sound institutional foundation for the development of the credit reporting industry by putting forward a principle in 16 Chinese characters, which emphasized “law and regulation improvement, franchising, commercial operation and professional services”. Following this, a large number of credit reporting institutions emerged. With the development of computer and communication technologies, we upgraded the bank credit registration and consultation system into a centralized, unified financial information database, which was put into operation nationwide in 2006.
The stage of advanced development started in 2013, featuring the introduction of Regulations on Credit Reporting Industry. Meanwhile in recent years, China has released a great deal of documents on the development of the credit system, e.g. the Outline of the Social Credit System Development Plan (2014-2020) issued by the State Council. In 2016, the regulations on establishing and improving the mechanism of joint incentives for good credit behavior and joint punishments for poor credit behavior were issued. During this stage, credit reporting institutions thrived in the society, the first individual credit reporting institution was founded, and the market was opened wider to the outside world.
At present, the national financial information database has been established, and great achievements have been made in the construction of credit reporting system which aims to serve the general public. Besides, remarkable breakthroughs have been made in the development of market-based credit reporting institutions, with Baihang Credit, the first market-based individual credit reporting agency, in sound operation.
In the meantime, we have been nurturing and developing market-based credit reporting institutions. By September 2019, over 130 corporate credit reporting institutions and 97 credit rating institutions are operating businesses after being filed for record according to the law. It shows that a market-based landscape has basically taken shape where the government and the market work in parallel to drive the credit reporting industry forward.
Laws, regulations and legal systems on credit information were improved at this stage. Following the introduction of the Regulations on Credit Reporting Industry in 2013, a series of supporting regulations were released accordingly, to provide upper-level rules for the regulation and administration of the credit reporting market.
At the third stage, we strengthened personal information protection, and firmly defended the bottom line that no information leakage should occur. All institutions which have access to or operate based on personal information are required to enhance information security management, and regulations and provisions have been established to specify requirements on information protection from technical, operational and administrative perspectives. Meanwhile, we strengthened the regulation of credit reporting industry by conducting regular on-site inspections in addition to enhanced off-site regulation.
The fourth stage is characterized by opening up at a higher level. In recent years, in line with arrangements of relevant central authorities, we have made efforts in financial opening-up, and promoted the opening up of the corporate credit reporting market and the credit rating market in a steady and orderly manner. We worked with relevant departments to issue a series of policies and regulations on promoting the establishment of foreign-funded corporate credit reporting institutions and credit rating institutions.
Following these policies, foreign-funded institutions have picked up their pace to enter the Chinese market by establishing wholly-owned incorporated subsidiaries in China. It demonstrates that high-level opening up has been achieved in China’s credit reporting market. Some international bellwethers, such as Dun & Bradstreet from the US and Experian from the UK, were filed for record at PBC in 2018 and began conducting businesses in China. In January 2019, S&P Ratings (China) Co., Ltd., a subsidiary of one of the three major credit rating companies in the world, completed the filing process and became the first foreign-funded credit rating agency that was authorized to operate in China. (Source: Xinhua Net)
