© Reuters: Carlos Barria
Chinese and foreign companies are already "subjected to all kinds of regulatory controls" by Beijing, experts say.
Beijing has announced one of the most significant developments in its Social Credit System ahead of a planned nationwide rollout of its controversial behavioural engineering system pegged for 2020.

Comment: Mind the language, because, while China may be more upfront about what its intentions are, all governments are involved in behavioral engineering in one way or another; the ban on smoking and the prohibitive taxes on tobacco are just two obvious examples.

The National Development and Reform Commission (NDRC) circulated a statement saying it is pushing ahead with a corporate ranking system that will affect 33 million companies.

But it is generally understood that all companies in China and its 1.4 billion citizens will by 2020 be covered by the mandatory system that is designed to value and engineer better individual behaviour by awarding the trustworthy and punishing the disobedient.

Localised versions of the national Social Credit System (SCS) at city and provincial levels are already being employed in the forms of pilot programs including a Deadbeat Map, which allows WeChat users to identity the location of those who have failed to pay their debts within a 500-metre radius, and a system for keeping irresponsible dog owners in check.

Most of the media coverage on the system so far have focused on individuals and pilot projects — the latest announcement marks the widest sweeping national development to date, or at least, that has been released to the public.

It is unclear whether Australian employees or foreign companies will be caught up in the corporate social credit system — the ABC approached the NDRC and the Department of Foreign Affairs for comment, but have yet to receive a response.

In Monday's statement, the NDRC said it had completed initial assessments which will be used to rate the companies as having excellent, good, fair, or a poor credit rating, but added the comprehensive report would only be available to government officials.

The commission did not elaborate on the credit rating methodology or list any of the companies affected, but said it will be seeking feedback from those companies and local authorities by the end of October.

But the rating will reportedly include court rulings, tax records, environmental protection issues, government licensing, product quality and punishments by market regulators.

'It could spell life or death for individual companies'

Yaqiu Wang, China researcher for Human Rights Watch, told the ABC both Chinese and foreign companies were already "subjected to all kinds of regulatory controls" by the Chinese Government and the lack of transparency around the rating methodology was a cause for concern.

Comment: Most companies in most countries are subjected to regulatory controls; those that aren't tend to be in bed with the government.

"If a company thinks that it is unfairly rated, to what extent the company can challenge the designation, and through what mechanisms? [It's] unclear," she said.

The NDRC didn't specify which companies will be targeted nor when the corporate system will be officially rolled out, but if 33 million companies are being targeted the number of individuals affected could easily be in the hundreds of millions.

The European Chamber of Commerce in China last month published a report warning European companies operating in China to prepare for the rollout set for 2020.

It said companies' behaviour will be continually monitored, with scores being adjusted accordingly, and businesses risked serious repercussions like sanctions or even blacklisting if they don't comply.

"China's Corporate Social Credit System is the most concerted attempt by any government to impose a self-regulating marketplace, and it could spell life or death for individual companies," said Jörg Wuttke, president of the European Union Chamber of Commerce in China.

"Businesses in China need to prepare for the consequences, to ensure that they live by the score, not die by the score."

© (Reuters: Thomas Peter)
Photo: Surveillance software identifies customers' patterns at a department store in Beijing.
What is anticipated to happen in 2020?

Samantha Hoffman, an analyst at the Australian Strategic Policy Institute (ASPI), told the ABC that 2020 wasn't a deadline where the SCS is expected to be a perfect system, rather it marked the end of a planning period.

"There are certain objectives that were set out in that 2014-2020 plan [like setting a legal framework], but the actual system itself will still be evolving after that," she said.

"What is expected [in 2020] is already pretty much in place in that if you look at every provincial, and even city municipal governments, they have their own implementation legislation."

In addition to monitoring individual behaviour, Ms Hoffman noted the Civil Aviation Administration of China (CAAC) used trial "Civil Aviation Industry Credit Measures" — what appears to be a credit score for aviation companies — to force airlines to comply with political demands.

In April 2018, the CAAC sent letters to dozens of international airlines — including Qantas — demanding their international websites be changed to show Taiwan as a part of the People's Republic of China.

The letter the CAAC sent to United Airlines was made public, and it said the body would "make a record of your company's serious dishonesty and take disciplinary actions" if it didn't comply.

Ms Hoffman said an 18-digit Chinese business registration number assigned to companies operating in China also made it easier to share information between various government offices.

As of yet, there is no single national scoring system, and there is also a difference between the government system and private company programs used to profile their customers using complex analytical systems.

"I don't think that it will ever be a fully centralised system, each [local] government will have a slightly different version," she said.

"I think there is enough evidence to suggest that there is a lot more integration of information, or at least the ability to integrate information."

Many Chinese citizens deemed untrustworthy have also been put on blacklists which can come with wide-ranging national restrictions.

More than 15 million people in China have been punished under the system, with a combined 32 million plane tickets and 6 million train tickets cancelled, according to the Supreme People's Court of China.

The national social credit system will also reportedly only be applied to mainland citizens, excluding Hong Kong and Macau Special Administrative Regions which are governed under the One Country, Two Systems principle.

After the One Country, Two Systems principle expires in 2047 and 2049 respectively, it is unclear whether the system will be applied to the regions.