The effect of China’s new corporate social credit system for Swiss businesses

China’s corporate social credit system (SCS) is going to challenge Swiss companies and will impact their Chinese businesses. PwC Switzerland provides Swiss corporations with a report on their fitness with regard to this new comprehensive regulation system. “Live by the score, die by the score” seems to be the new paradigm, as reported by the European Union Chamber of Commerce in China, and Swiss companies need to be ready to leverage it.

Artificial intelligence is going to rate Swiss businesses in China directly and indirectly. Good ratings result in rewards and bad ratings can have negative consequences.

The Chinese government has developed a new rating system to achieve a self-regulated marketplace. The system is being tested this autumn, with launch expected by the end of 2020. It is the Chinese government’s vision to use advanced technologies (big data and artificial intelligence) to monitor and steer both government authorities and private companies. The corporate SCS assesses the behaviour of companies (including their supply chains) based on 30 regulatory rating criteria, representing around 300 rating requirements that cover all aspects of Swiss companies’ businesses in China. Ratings can be positive, but regulations cover predominantly the consequences of a bad score. As reported by the European Union Chamber of Commerce in China, every negative rating (bad score) corresponds to a set of measures that potentially result in being blacklisted, and ultimately may result in joint sanctions on a blacklisted entity. Thus, the corporate SCS will be the most comprehensive system created by a government to achieve a self-regulated marketplace, and it will fundamentally change how business is done in China in future.

Understand and assess the effect of the new corporate social credit system on your specific business model.

Swiss companies need to ensure that their processes and structures (including their supply chains) are fit to effectively handle the challenges related to the corporate SCS requirements in order to avoid negative ratings, measures and potential sanctions and to protect their revenues and businesses in China. PwC Switzerland provides you with a report (transparency solution) that assesses your fitness with regard to this new comprehensive regulation system.