China's Social Credit System Presents New Compliance Challenges


The roll-out of China’s social credit system (SCS) is expected to be nearly complete by 2020. While many news stories have focused on the SCS’ scoring of individuals in China, SCS also applies to companies operating in the country and may impact how they approach anti-corruption compliance.  

Under the SCS, the Chinese government collects information and rates companies across a wide range of operational, financial and environmental categories. The government can then reward or sanction companies based on the information and rating. The underlying principal is to enhance the “trustworthiness” of Chinese companies and individuals. 

SCS data is shared across Chinese government agencies. This means non-compliance in one area, such as bribery and corruption, will be more quickly reported, publicized, and disseminated among multiple regulators and possibly the public. Companies and individuals could face more immediate and wide-ranging penalties for violations. 

Foreign companies have traditionally viewed anti-corruption compliance in China through the lens of other countries’ laws, such as the U.S. FCPA or UK Bribery Act. The SCS changes that, adding a new localized compliance concern that will need to be addressed and quickly. 

Companies will need to understand the approximately 300 and growing requirements under the SCS and assess any compliance gaps. Additionally, they will want to monitor publicly available data in systems, reports, and news media stories to address any negative or incorrect information. 

To learn more, consider reading an FCPA Blog article on this subject by Eric Carlson, partner, and Helen Hwang, special counsel, in Covington & Burling LLP’s Shanghai office.