Financially Sound Credit Rating System to be Set up: Dai Xianglong

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Last updated at: (Beijing Time) Monday, March 18, 2002

Financially Sound Credit Rating System to be Set up: Dai Xianglong

China is preparing to establish a national credit rating system for businesses and individuals. Under the system, an individual's negative financial past with banking services will be registered as a lifetime record, which will affect their later deals with banks. The system will enable banks to lower the loan risk by taking into account customers' credit entries before making any final deals.

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National credit rating system to be set up

China is preparing to establish a national credit rating system for businesses and individuals, according to the country's central bank.

Under the system, an individual's negative financial past with banking services will be registered as a lifetime record, which will affect their later deals with banks, said Dai Xianglong, governor of the People's Bank of China.

Dai said the central bank built a pilot regional system in Shanghai in East China last year.

The State Council recently ordered the central bank to spread the regional system to build a national network, said Dai.

Functions of the system

The system will enable banks to lower the loan risk by taking into account customers' credit entries before making any final deals. Meanwhile, customers will tend to safeguard their reputation when considering the long-term influences of "stained" entries.

Such a credit rating system, according to some domestic experts, are closely related to an individual's reputation at other relevant institutions, including customs and taxation and foreign exchanges.

Therefore, if businesses maliciously overdraw funds from their accounts, they will lose the credit not only among banks but around the whole financial society, said experts.

Those businesses listed on the "blacklist" by banks will meet obstacles from other governmental departments and social institutions. Such a "blacklist," according to sources with the central bank, will be open for inquiry at official websites.

According to the central bank, Shanghai citizens have avoided the pedantic procedures of finding guarantors and offering the individual credit records certificated by employers when they apply for credit cards at local banks, now that the city has established the credit rating system.

Chinese Vice-premier Wen Jiabao has urged the country's state commercial banks to strengthen credit control in order to prevent financial risks.

He asked the banks to improve their loan mechanisms, practise prudent accounting principles, adopt strict standards of information disclosure, and gradually reduce the ratio of non-performing assets. >>details

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