Heard on the Street: China’s much-criticized social-credit system could make or break foreign businesses as well as individuals
By Nathaniel Taplin Sept. 17, 2019 5:51 am ET A key target of China’s coming “social credit” system, which among Westerners usually triggers visions of “1984”-style monitoring of people, is actually misbehaving businesses.About 80% of information on the main data-sharing platform relates to companies rather than individuals, according to China consulting firm Trivium. Scheduled for full rollout in 2020, the system could help level the playing field, if well-implemented.
The flip side is that information doesn’t actually flow well through society. Censorship and a Party-centric court system make whistleblowing difficult and dangerous, creating plenty of opportunities for corporate and official malfeasance. Losers are often small or foreign companies without good official contacts to bend the rules for them.
A bad rating in one area will have ripple effects. For instance, being “distrusted” for customs purposes could affect not only border inspections but governmentwide approvals, currency transactions and the ability of the company’s legal representative to purchase property, according to an August report from the European Union Chamber of Commerce.
There are downsides, however. Compliance costs will rise—and that ripple effect means even minor infractions could cause severe damage. And the evolving requirements will be harder for small businesses to keep track of.
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