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China economy
EconomyChina Economy

China’s corporate social credit system blacklist that companies pay US$2,500 an hour to avoid

  • Companies fear inclusion in China’s corporate social credit system, which can result in punishment for bad behaviour
  • Beijing says system is designed to scare companies straight

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Why you can trust SCMP
China’s corporate social credit system is a public repository of good and bad behaviour by every company in the world’s second-largest economy. Photo: AP
Bloomberg

China Railway Construction Corporation deployed thousands of workers over four years to build part of a coal-carrying line from Inner Mongolia to Jiangxi province.

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The project cost about 200 billion yuan (US$28.5 billion) and was heralded by state media last year as an exemplar of “safe production” with no injuries or deaths. Except there were, and China Railway’s project managers were covering them up.

A tip-off exposed the conspiracy to local reporters, and a state-run China Railway unit eventually admitted that three workers died in 2017 when a panel they were standing on fell into the Ganjiang River. The managers were punished and so was the subsidiary: It was blacklisted for a year by the government and subject to more inspections, limits on bidding for public projects and restrictions on issuing bonds and shares.

That black mark was fed into China’s corporate social credit system, a public repository of good and bad behaviour by every company in the world’s second-largest economy. In an environment where a tweet, map or even T-shirt slogan can cause a world of pain, businesses are eager to stay below the government’s radar. The assemblage of an all-encompassing compliance monitor in cyberspace only compounds their anxiety.

“It’s a typical credit rating but sort of on steroids,” said Andrew Polk, co-founder of Beijing-based Trivium China, which consults companies on social credit.

“The system will be widely used in China to oversee domestic and foreign companies, and firms have to assign resources to keep a real eye on making sure their records are clean.”

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The corporate system is developing side by side with one accumulating data on China’s 1.3 billion citizens that is triggering fears of increasing state control. It aggregates records from different agencies showing whether a business has followed or violated hundreds of rules.
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