Stronger system will improve market order and reinvigorate the economy
Companies will face stiffer punishments for deceptive practices as China strives to expand its credit reporting system.
Food and drug manufacturing, social security and finance sectors will be key sectors in the system, although all industries — and government agencies — will be included, according to information released after the State Council’s executive meeting chaired by Premier Li Keqiang on Wednesday.
Stronger credit reporting will create market order and reinvigorate the economy, the statement said.
It said China will establish a broad system by 2020 that will cover government agencies, businesses and other social sectors.
The system will provide information by which business and government entities can assess the creditworthiness of others.
Government agencies should take the lead, the statement said, by disclosing information in a timely manner and improving the transparency of their decision-making processes.
A nationwide standard for collecting and classifying credit information for businesses will be established, and information sharing between regions and industries will be facilitated.
Businesses and industry associations will be encouraged to improve their self-discipline to boost credibility. Legislation governing the credit reporting system will also be accelerated, the statement said.
Business fraud, the manufacturing and selling of fake products and improper academic behavior are defined in the statement as behaviors that undermine credibility.
"As all the social sectors should be included in the credit system, key areas concerning food and drug safety, social security and finance need more attention," the statement said, and "dishonest practices will face greater punishment".
The expanded reporting system is expected to lay the cornerstone for China’s market economy and facilitate economic objectives. It will help to reduce transaction costs, improve the predictability of economic activities and reduce unnecessary government intervention.
Han Jiaping, director of the credit management department at the research institute of the Ministry of Commerce, said some Chinese companies do not fully understand the significance of credit and do not pay enough attention to credit management within their companies.
He noted that information sharing and heavier punishments are the two keys to building a credible system.
"The price paid for business dishonesty is too low, while the price of credit rating remains high," he said.