- While China’s Social Credit System has lost the attention of international media and commentators, its impact on the operations of companies in China remains significant: The (limited) available data on blacklisting suggests a significant increase in the number of blacklisted companies in 2023.
- Most importantly, Chinese regulators do not shy away from blacklisting even large and important companies such as Wanda Group. Similarly, the type of ownership does not seem to matter, as prominent blacklisting cases include both state- and privately-owned companies.
- Foreign-owned companies have also come under pressure, such as the Swiss elevator company Schindler Group, which in August 2023 was placed on a list for repeated punishment („屡禁不止、屡罚不改“经营主体名单“) by China’s State Administration for Market Regulation (SAMR).
- However, beyond the mere fact of being blacklisted and the administrative fines for the underlying non-compliance, the full impact of blacklisting on a company still varies widely. While regulations call for joint sanctions against blacklisted companies by a wide range of government agencies, the actual effectiveness of these mechanisms remains fragmented.
- This certainly reduces the immediate urgency for companies to act. At the same time, no company based in China should ignore the fact that China’s Social Credit System is constantly evolving, with its underlying mechanisms being updated and improved at a high frequency: In 2023 alone, a total of 118 national-level regulations were issued for the Social Credit System, supported by more than 500 detailed regulations at the local level.
- China’s Social Credit System is not yet complete, nor is it in full swing. However, it is slowly but surely becoming a subtle but crucial element of China’s economy and economic decision-making.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.