China’s social credit system for business creates new and complex headaches for EU trade officials

Sources say China’s corporate social credit system is an impediment to finalising the bilateral investment treaty with the EU, under negotiation for six years

The NBA’s freedom-of-speech crisis is seen as an example of how China could use the system to punish Western firms and complicate future trade negotiations

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China’s corporate social credit system will require companies to report enormous amounts of data to Chinese officials, including information on their business partners. Photo: Bloomberg

Ryan Swiftin Hong KongandFinbarr Berminghamin Brussels

Published: 10:00pm, 5 Nov 2019Updated: 5:50am, 6 Nov 2019

On his maiden trip to China as the incoming European Commission’s trade commissioner this week, Phil Hogan has prioritised advancing talks on a bilateral investment treaty that have dragged on for six years. However, those familiar with the negotiations say that a major sticking point has emerged that did not exist in 2013: China’s corporate social credit system.

An offshoot of the much-discussed social credit system for individuals, the loosely defined and poorly understood scorecard for businesses in China – according to a recent report by the European Union Chamber of Commerce in China – is now a major irritant for international business and trade officials, as it nears implementation.

Of concern to businesses is that the system could potentially be used to penalise foreign firms or their staff who have spoken out on issues deemed off limits in China, such as the protests in Hong Kong or the persecution of Uygurs in Xinjiang.

And Wolfgang Niedermark of the German Chamber of Commerce in Hong Kong and Dr Martin Wansleben, chief executive of the Association of German Chambers of Commerce and Industry, both agreed that the incoming corporate social credit system is creating problems for the proposed bilateral investment treaty.

We are really not happy with the situation because we are somehow lost. The Chinese authorities cannot simply expose it to us and not explain [it], and we don’t have a basis for planning

Wolfgang Niedermark

“We are really not happy with the situation because we are somehow lost,” said Niedermark. “The Chinese authorities cannot simply expose it to us and not explain [it], and we don’t have a basis for planning. What we want to see, at least, is that there is no discrimination between Chinese companies, private companies and foreign companies.”

The corporate version, which will require companies to report enormous amounts of data to Chinese officials including information on their business partners, has largely flown below the radar with most of the attention focused on the social credit system for Chinese individuals.