There have been further developments which require actions on a broader front.  The critical issue of the pending regulation is a provision which prohibits the export of credit information!

In August, 2011, the SCLAO (State Council Legal Affairs Office) published for comment its Regulations on Credit Reporting (Draft for Second Round of Public Comments) (“Second Draft Regulations).  The Second Draft Regulations improved upon the First Draft Regulations, particularly in that individual and enterprise credit reporting are regulated differently and the credit rating industry is no longer covered by these regulations.

BIIA and its members responded in time however since August was a vacation month our user community did not respond as vigorously as on the first draft.  Therefore we expect that the new draft may be adopted shortly with minor changes.

The most damaging aspect of the new regulation will be the requirement that data bases with credit information of Chinese businesses and individuals must be maintained in China and cannot be transferred abroad.  SCLAO and the Peoples Bank of China (the regulator) are quite adamant about this. 

We are aware that BIIA members and other industry players are maintaining credit information data bases on Chinese businesses outside the jurisdiction of China.   If the new regulations come into force as indicated in the second draft of Credit Information Regulations, this practice of maintaining credit data on Chinese businesses outside China may no longer be possible.

The unintended consequences of this regulation will be a negative impact on the granting of trade credit on exports to China.   In the worst case information companies will not be able to sell commercial credit information to customers outside China.   Credit grantors who export to China will have to move their credit assessment into China to be able to have access to local credit information.

Nevertheless there is the possibility that the State Council will leave it to the regulator (The People’s Bank of China) whether certain data would be permitted to be exported on a case by case basis or when consent is given by the data subject.   We fear that this would be a rather cumbersome, expensive and time consuming process.

Attached is a summary of the current situation: China regulations 2nd draft summary BIIA

BIIA board members in China are engaged in conversations with government officials to obtain further clarification.   We are also engaging credit management associations and user groups to intervene on our behalf.

Best regards

Joachim C Bartels

Managing Director