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Chinese Corporate Social Credit System (CSCS) - PwC China Compass

15 February, 2021

Your expert for questions

Frank Schmidt

Dr. Frank Schmidt
Partner at PwC Germany
Tel: +49 173 3212837
Email

Concept – a new market order

China intends to shift from a system with market entry barriers and regulated joint venture requirements towards an open market suitable for more international players and investors and more equality with regards to opportunities. The Corporate Social Credit System (CSCS) is the Chinese approach to leverage latest technology to steer its economy to more transparency and compliance which will lead to equal opportunities for business partners – domestic and abroad.

By collecting, integrating, aggregating and processing an enormous amount of data CSCS generates compliance-ratings and -records tracing the companies behaviour as well the behaviour of its individuals.

CSCS is affecting all companies with a footprint in China – being it subsidiaries, joint ventures or other operations.

Set up of CSCS – three elements

Master database

The National Credit Information Sharing Platform (NCISP), is collecting all data of market participants (e.g. identity records, financial and tax records, court records, annual reports etc.) as a primary source for social credit files on a corporate and on an individual level. 75 percent of the overall data will be marked as “open to the public”. The company’s overall behaviour will be represented in a scale-rating.

Listing

Companies and individuals get listed when violating existing regulations or breaking the law in a blacklisting system. The blacklisting focuses on the regulation of malpractice in the Chinese business environment. Redlists on the other hand contain companies with excellent credit records.

Unified Punishment and Rewards System

The framework enables government agencies to enforce blacklist entries. Various government authorities together penalise those companies and individuals with poor credit records (listed on blacklists) and reward those with excellent credit records (listed on redlists).
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Relevant governmental institutions that may enforce compliance

Relevant governmental institutions that may enforce compliance

Examples of potential consequences of non-compliance

  • Targeted audits by governmental authorities (e.g. tax refund audits)
  • Travel restrictions for company representatives 
  • Increased inspection rates for import and export cargo
  • Temporary exclusion from public tenderings
  • Delays in governmental approval processes

One-Stop Shop

Foreign investors active in the Chinese market should take the rapid implementation of the CSCS very seriously and proactively study these specific plans and their likely impact on their respective businesses. Our holistic service offering helps you cover all your blind spots and enhance your opportunities in successful businesses in the Chinese environment.

Gap analysis & maturity assessment

Conduct gap analysis and maturity assessment of your business processes against the CSCS rating criteria to understand your preparedness for the CSCS.

Holistic compliance implementation

Based on the gap analysis outcome, implement and strengthen the weak spots in your compliance system to strengthen your preparedness for the CSCS.

Global intelligence

An integrated business partner and third party integrity service on your China related subsidiaries, business partners and suppliers.

Compliance audits

Conduct risk-based audits to detect high risk non-compliant spots.

Holistic compliance advice throughout preparedness, implementation to credit restoration

Tax, legal, product compliance, anti-bribery and corruption compliance, and more.

Crisis management

Effectively respond to adverse enterprise-wide impact in case of blacklisting.
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Contact us

Dr Frank Schmidt

Dr Frank Schmidt

Partner, GenAI Lead Business Development & Strategic Partnerships Tax & Legal Services, PwC Germany

Tel: +49 173 3212837

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Dr. Robert Paffen

Dr. Robert Paffen

Leader Risk & Regulatory, PwC Germany

Linkedin Follow Email
Thomas Heck

Thomas Heck

Partner, PwC USA Business Group Leader & China Business Group, PwC United States

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