- China’s new market governance tool, the enterprise credit risk score (企业信用风险分类) remained largely below the radar of public attention so far.
- However, after successfully concluding the pilot implementation phase in 2019/2020, risk score implementation was recently expanded to country-wide scale.
- The risk score will determine the frequency of government inspections at a company. The lower the result of the score, the more inspections companies should expect.
- In contrast to many other company ratings, the risk score results are non-transparent, and they will not be published. The score is purely an internal tool for government authorities to focus their supervision efforts on those companies that are more likely to be non-compliant.
- Obviously, companies should avoid a poor risk score. They can do so by keeping an immaculate Corporate Social Credit System (CSCS) compliance performance: the CSCS provides the core data used to calculate a company’s risk score.
- Most international companies with a solid compliance management system will be able to manage this new market governance tool. However, the changing and fast-moving regulatory environment in China puts also the most advanced compliance systems under pressure.
- For all companies operating in China: now is the time to check and adjust your company’s compliance system in China to the country’s new market governance tools.
Sinolytics is a European consulting and analysis company that focuses entirely on China. It advises European companies on their strategic orientation and concrete business activities in China.