China’s Social Credit System: Scope of Information Collection and Punishments for Untrustworthy Entities

Posted by Written by Alexander Chipman Koty Reading Time: 6 minutes

China continues to amend guidelines for its social credit system, offering clearer and up-to-date information on how the system is implemented and what punishments companies may face for violations. 

The changes are included in the National Social Credit Information Basic Catalog (2022 Edition) and the National Basic List of Punishment Measures for Untrustworthiness (2022 Edition). These two draft documents were jointly released by the National Development and Reform Commission, the People’s Bank of China, and other departments on December 28, 2022. 

China’s social credit system aims to leverage big data to assess the trustworthiness of entities in the country, to avoid issues like non-compliance and tax evasion. There is one system for businesses, one for individuals, one for the judiciary, and one for government officials, as well as innumerable regional variations in interpretation and application. 

Authorities developed the latest updates to promote better standardization and set clearer boundaries for local interpretations. As the social credit system becomes more mature, uniform, and standardized, foreign businesses and individuals face greater urgency in ensuring compliance with laws and regulations to avoid sanctions and other punishments. 

Clarifying the scope of information collection under China’s social credit system 

The National Social Credit Information Basic Catalog more clearly defines the scope of the social credit system, outlining what information should be collected, the legal basis for doing so, and which agency should be responsible for collection. This catalog is updated regularly, and the latest 2022 catalog is in place until December 31, 2023.  

The catalog instructs relevant departments to clearly define what information they are collecting, including the item’s corresponding behavior, its collection source, frequency of updating, and more. 

The 2022 catalog lists 12 items of information that governments should collect, one more from the previous year. These are outlined in the table below. 

National Basic Catalog of Public Credit Information (2022 Edition) 
Information type  Example 
Basic registration information  Basic information on the entity’s registration, unified social credit code (18-digit code assigned to all companies in China), business unit registration information, customs filing information, etc. 
Information on the execution of judicial adjudication and arbitration  Information on criminal sentencing, civil judgments and judicial information, and inclusion in the List of Dishonest Entities Subject to Enforcement and Restricted Consumption Information, etc. 
Administrative management information  Information on administrative licenses, penalties, enforcement, confirmations, expropriations, payments, rulings, compensation, rewards, and supervision and inspection information 
Professional title and professional qualification information  Information on professional and technical personnel titles, professional qualifications, and professional and technical personnel qualification examinations. 
Information on the inclusion on the List of Entities with Abnormal Operations  Information such as whether market entities have been legally included or removed from the list of abnormal operations. 
Information on the inclusion on the List of Seriously Untrustworthy Entities  Information on entities’ inclusion in various lists of untrustworthy entities, such as those for entities that have been found to engage in untrustworthy behavior relating to government procurement, national defense, payment arrears to migrant workers, as well as various blacklists, including the overseas investment blacklist, blacklist of entities in the express mail and courier field, and so on. 
Information on the performance of contracts  Information on acts of failure to perform contractual agreements and violations of labor service personnel’s legitimate rights and interests in the field of foreign labor service cooperation, failure by engineering projects to pay wages to migrant workers, and so on. 
Information on credit commitments and their fulfillment status  Information on credit commitments and performance by enterprises in various licensing, reporting, and maintenance procedures in different fields, such as filling out statistical reports and credit restoration, handling electric power business permits and undertaking installation, repair, and testing of electricity facility permits, etc. 
Information on credit evaluation results  Information on tax credit evaluations, personal credit points for tax-related service personnel, credit score and credit rating of tax-related professional service institutions, etc. 
Information on regulatory and legal compliance  Information on securities market integrity files, illegal acts in the civil aviation industry, violations of laws and regulations in the field of engineering construction, etc. 
Honor information related to honesty and trustworthiness  Information related to honor and trustworthiness in various industries and fields, such as transportation, statistics, the environment, and volunteering, as well as information on awards and honors received. 
Credit information voluntarily provided by market entities  Voluntarily provision or authorization of information related to tax payments, social insurance premiums and housing provident funds, water, electricity and gas, warehousing and logistics, intellectual property rights, contract performance, and related financial and business performance. 
Note: Above scope is not exhaustive. 

While the catalog lists the above 12 items as information that can be collected, it also states that local governments can release supplementary catalogs to describe other information collected, within certain bounds. 

The basic catalog also explicitly states that public institutions are not permitted to collect information on entities that fall outside the scope of the categories listed in the catalog. 

Defining rewards and punishments 

The National Basic List of Punishment Measures for Untrustworthiness (the “basic list”) is designed to standardize and define punishments for “dishonest” behavior. The list explicitly states that public agencies are not permitted to mete out punishments to entities other than the ones included in the list. 

The 2022 version of the basic list, the most recent version, contains three categories of sanctions, and a total of 14 items. The three categories are: 

  • Measures implemented by state agencies to reduce the rights and interests of credit entities or increase their obligations. Examples include restrictions on market or industry access, employment, consumption, education, and the ability to leave the country. 
  • Measures implemented by state agencies do not reduce the rights and interests of credit entities or increase their obligations. Examples include restrictions on applications for fiscal funds, restrictions on enjoying preferential policies, sharing of untrustworthy information, and regulatory inspections. 
  • Measures implemented by organizations other than state agencies. Examples include inclusion in market-based credit investigation or rating reports and strict credit granting requirements. 

The 14 items under these three categories are detailed in the table below. 

Basic List of National Dishonest Punishment Measures (2022 Edition)
Penalty  Example 
Market or industry entry bans  Prohibition from obtaining specific administrative licenses directly related to public safety, personal health, life, and property safety within a certain period of time, etc. 
Occupational ban or restriction  Prohibition from serving as an inspector, etc. 
Restrictions on holding an office or post  Restrictions on serving as an executive of state-owned enterprises, financial institutions, hazardous chemicals, and other industries, etc. 
Restrictions on relevant consumer behavior  Restrictions from air travel, taking soft sleeper trains, high-speed EMU trains, or multiple seats on EMU trains, etc. 
Ban on exiting the country  Restriction or prevention from exiting the country’s borders. 
Restrictions on returning to study  Within a certain period of time, restrictions from the entry to and resumption of studies. 
Restrictions on applying for fiscal funding projects  Prohibition from undertaking or participating in scientific and technological activities supported by financial funds within a certain period of time, etc. 
Restrictions on access to preferential policies and facilitation measures  Restrictions on the application of preferential policies such as government financial support measures, etc. 
Restrictions from participation in merit appraisals  Revocation of rewards; suspension or disqualification of participation in the nomination and review activities of the National Science and Technology Awards, etc. 
Inclusion in the seriously dishonest entities list  Inclusion in the list of entities that have engaged in serious illegal and dishonest behaviors in government procurement, etc. 
Publication of information on dishonest behavior  Publication of information on dishonest behavior. 
Inclusion in scope of entities for key supervision  Listed as a key regulatory target; subject to higher frequency of spot checks. 
Provision of credit information for use as reference by government departments  Relevant government departments can refer to and use the entity’s credit information in administrative management and public services 
Provision of credit information for use as reference by market entities  Credit agencies can collect relevant information on dishonest behavior on the entity and incorporate it into credit records and credit reports; rating agencies can refer to relevant information in credit ratings, etc. 

In addition to the punishments included on the basic list, local governments are permitted to create supplementary lists for special punishment measures applicable only within their jurisdictions. However, it also emphasizes that they need to be in accordance with the laws and local authorities need to gain approval to implement them. 

In mid-2021, the State Administration of Market Regulation (SAMR) released two documents clarifying the types of violations that can land a company on the Seriously Illegal and Dishonest Entities List, and what they can do to restore bad credit if they have been punished for violations.  

For details on these two documents, see our article on Violations and Restoring Bad Credit under China’s Social Credit System. 

Establishing consistency and uniformity 

The social credit system is commonly misunderstood by foreign observers, who often misinterpret its aims, exaggerate its capabilities, or conflate it with other credit rating systems by private agencies or fintech platforms., such as Zhima Credit managed by Ant Finance, the company that runs Alipay. 

Nevertheless, even those acquainted with the system are often uncertain about its scope and real-world use. A major reason for this is the significant regional variations in its implementation, not just from province to province, but even from city to city. 

Besides addressing the issue of inconsistency, the latest updates to the social credit system are further evidence of Chinese authorities’ willingness to adapt and optimize the program.. 

The increasing uniformity of the system and clearer directions on how it should be implemented means that foreign businesses and individuals are now able to develop more detailed strategies on how to respond to and comply with the system. As the social credit system becomes more comprehensive and widely used, legal and regulatory compliance will be more important than ever. 

This article was originally published on August 9, 2021, and last updated on May 30, 2023. 

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