Author: Shanli Zhang

When a person falls behind on a loan payment, it will naturally affect their next loan application. But matters become more complicated when loan delinquencies, contractual breaches, administrative penalties, judicial enforcement actions, and platform rule violations are all placed within a single framework of “credit.” Although these records may all appear to be related to “credit,” they are fundamentally different in nature. Loan delinquency is primarily a matter of financial risk; contractual breach is primarily a matter of civil liability; an administrative penalty is primarily a matter of violating administrative law; judicial enforcement primarily concerns compliance with legally binding instruments; and platform violations primarily concern the governance of platform rules. All of these may constitute negative records, but the fact that they are negative does not mean they should all be interpreted as evidence that “this person is untrustworthy,” still less as proof that “this person has bad character.”

This is precisely the issue that China must guard against as its credit economy develops: once the concept of credit becomes overly expansive, specific records of conduct from different fields can easily be blended into a vague label attached to a person’s character.

The history of credit reporting in the United States provides a useful point of reference. Early American credit reporting also relied on character, reputation, lifestyle, and local opinion. Put simply, creditworthiness was judged by assessing a person’s “character.” Later, however, as the market expanded, credit-reporting data accumulated, legal regulation improved, and scoring technologies developed, mainstream financial credit reporting gradually shifted toward standardized records such as account status, debt burden, delinquencies, and repayment history.

In other words, the modernization of credit assessment does not mean incorporating more character judgments into credit. It means limiting credit assessment to records of conduct that are more specific, more verifiable, and more closely related to risk.

I. Early Credit Reporting: “Character Judgments” in a Market of Strangers

In a society of acquaintances, determining whether someone can be trusted with a loan often requires no complex data. You know where the person lives, what they normally do, what kind of reputation they have, and whether they have ever failed to repay a debt. Among acquaintances, credit depends on reputation and personal relationships.

In the nineteenth century, however, the American market expanded rapidly, and transactions were no longer confined to local circles of acquaintances. Merchants might conduct business with people far away, while creditors increasingly dealt with strangers. A new question therefore arose: if I do not know you, how can I tell whether you will repay your debt?

Today, we can examine accounts, transaction records, debt levels, and histories of delinquency. In early America, however, such standardized data systems had not yet been established. Credit-reporting agencies therefore began collecting information about borrowers on behalf of creditors, including their property, business conditions, local reputation, personal character, lifestyle, and even neighborhood gossip.[1]

In other words, early credit reporting transformed the reputation-based judgments of an acquaintance society into written reports that could be sold to distant creditors.

II. Why Did Early Credit Assessment Become a Matter of “Judging Character”?

Early credit reporting became moralized not because credit reporting inherently required an assessment of morality, but because reliable data were unavailable at the time.

There were no unified account records, no long-term repayment histories, and no information systems capable of sharing data across regions. Creditors could therefore ask only rougher questions: Is this person diligent? Do they exercise restraint? Do they have undesirable habits? Do they have a good local reputation? Do they conduct business honestly?

Today, these questions may appear to be assessments of character, but at the time they were believed to be related to repayment risk. People assumed that someone who lacked restraint, stability, or diligence would also be more likely to fail to repay a debt on time.

Early credit reports were therefore unlike modern credit reports, which consist primarily of accounts and figures. They were more like brief biographies of a person’s character. Rather than merely recording whether someone had ever been delinquent, they sought to determine whether that person was fundamentally worthy of trust.

This was the moralization of early credit: credit was not merely about debt, but about the person as a whole.

The problem lay precisely here. Local rumors could be inaccurate, personal impressions could be biased, and so-called “reputation” could be shaped by social prejudices involving class, gender, race, religion, and other factors. Once such evaluations were entered into credit reports, they could be packaged as “credit facts” and affect a person’s opportunities in the marketplace.[2]

III. Modern Financial Credit Reporting: From “Evaluating the Person” to “Recording Conduct”

As consumer credit became increasingly widespread in the United States and financial markets continued to expand, local reputation and hearsay could no longer support credit decisions on a nationwide scale.

Banks, retailers, and financial companies needed information that was faster, more standardized, and easier to compare. The credit-reporting system therefore gradually evolved from small local agencies into nationwide databases, and the focus of credit assessment began to change.[3]

The question used to be: Does this person have good character?

The question later became: Has this person made repayments on time?

Previously, the relevant factors were reputation, lifestyle, and local opinion.

Later, the focus shifted to account status, debt burden, delinquencies, repayment history, and records of credit inquiries.

This was the “de-moralization” of mainstream financial credit reporting. It should be noted, however, that de-moralization does not mean that credit is entirely neutral, nor does it mean that credit systems no longer evaluate people. It simply means that mainstream financial credit reporting no longer directly assesses whether someone is a “good person.” Instead, it records whether the person has fulfilled their obligations within financial relationships.

Modern credit reporting has not ceased to evaluate people; it has simply adopted a different method of evaluation. Rather than using the language of character, it evaluates people through records of conduct and probabilities of risk.

IV. How Did Law and Technology Change Credit Assessment?

The transformation of American credit reporting resulted not only from market development, but also from legal regulation and technological progress.

On the one hand, the law began to restrict the use of certain identity-related factors in credit decisions. In the past, for example, women applying for credit could face restrictions because of their marital status or family role. Later, the Equal Credit Opportunity Act and related rules restricted credit discrimination based on factors such as sex and marital status. This helped redirect credit assessment toward information genuinely related to the risk of nonperformance, such as income, debt, and repayment history.[4]

On the other hand, credit-scoring technologies emerged. Credit scoring compresses complex account records into a single score or risk category, enabling financial institutions to assess risk more quickly, consistently, and at lower cost.[5]

This further accelerated the shift from narratives about character to calculations of risk.

Technology, however, is not inherently fair. In the past, a credit report might have stated that “this person is of poor character.” Today, a system may simply assign the person a low score. The language and format have changed, but the function of screening remains.

V. Credit Did Not Disappear; It Was “Diverted into Different Channels”

One of the most common misunderstandings about the modernization of American credit reporting is the belief that it has completely eliminated moral judgment. In fact, it has not.

Mainstream financial credit reporting has increasingly centered on records of contractual performance. Yet in areas such as housing, employment, insurance, and background checks, consumer reports may still contain extensive information used to determine a person’s eligibility.[6]

When renting a home, for example, a landlord may review a tenant-screening report. The report may contain credit history, rent-payment records, eviction records, and civil or criminal records. The problem is that an eviction record does not necessarily mean that a tenant deliberately breached an agreement. It may have resulted from a dispute, settlement, dismissal of the case, or even an incomplete record. Once it enters a screening system, however, it may be reduced to the conclusion that “this person presents a risk.”

The same applies to employment. Employers may examine criminal records, educational backgrounds, professional licenses, and employment histories. Certain criminal records may genuinely be relevant to the risks associated with particular positions. But if an employer fails to distinguish between the nature of the offense, how long ago it occurred, and its relevance to the position, and instead excludes anyone with any record, a single event from the past can become a long-term label.

American credit reporting therefore did not move from moralization to complete de-moralization. Instead, an institutional division occurred. On one side is mainstream financial credit reporting, which primarily assesses lending risk. On the other side are specialized consumer reports, which continue to perform eligibility-screening functions in housing, employment, insurance, and other contexts.

Evaluation has not disappeared. It has merely changed its location, form, and language.

VI. Implications for China: The Development of the Credit Economy Must Have Boundaries

As the market economy, online transactions, and the platform economy develop, the scope of transactions continues to expand, and many transactions no longer take place among acquaintances. Businesses, platforms, financial institutions, consumers, and government departments all require more verifiable information to reduce transaction costs, identify the risk of nonperformance, and improve regulatory efficiency. The 2025 Opinions on Improving the Social Credit System, issued by the General Office of the Communist Party of China Central Committee and the General Office of the State Council, also explicitly states that the social credit system is a foundational institution of the market economy. It calls for the establishment of a social credit system that covers all types of entities, operates under unified institutional rules, and is jointly developed, shared, and utilized, while supporting the unified national market and high-quality development.[7]

The construction of a credit system therefore has a legitimate rationale. Financial credit reporting can help banks assess borrowers’ risks; corporate credit information can help counterparties understand the condition of a business; and the disclosure of administrative penalties and judicial enforcement information can improve regulatory transparency and encourage compliance with legal obligations.

The problem, however, is that the construction of a credit system must not turn “credit” into an excessively broad concept.

Records of different kinds may be used, but they must not be used as though they were equivalent. Financial delinquencies, contractual breaches, administrative penalties, judicial enforcement actions, and platform violations correspond to different risks, responsibilities, and governance contexts. They cannot all be simplistically interpreted as evidence that “this person is untrustworthy.”

This is precisely the lesson offered by the history of American credit reporting: the direction of modern credit assessment is not to incorporate more judgments about character, but to confine credit to records of conduct that are specific, relevant, and verifiable.

The development of China’s credit economy should therefore observe at least three boundaries.

First, the boundary of purpose. Credit information should serve specific contexts and should not be used arbitrarily across different contexts. Financial credit reporting should be used to assess lending risk; information about administrative penalties should be used for administrative supervision; judicial enforcement information should be used to promote compliance with legally binding instruments; and records of platform violations should be used to maintain order on the platform.

Second, the boundary of information. Information included in credit assessments should be related to the specific risk concerned. Lifestyle, identity characteristics, and general moral conduct should not be incorporated into credit judgments.

Third, the boundary of procedure. Whenever credit information may affect lending, housing, employment, business operations, or public services, individuals and entities should be guaranteed the rights to access the information, raise objections, request corrections, and seek remedies.

In a word, the central task in developing a credit economy is not to incorporate every negative record into the concept of credit, but to distinguish between records of specific conduct and judgments about a person’s overall character.

Conclusion: Credit Is Not Better When It Is Broader, but When It Is Clearer

The history of American credit reporting shows that credit institutions originally contained a strong element of character assessment. Later, mainstream financial credit reporting gradually shifted from “judging character” to “examining records of performance,” and from character judgments to risk assessment.

This does not mean, however, that credit assessment has become entirely neutral, nor does it mean that moral judgments have completely disappeared. Modern credit increasingly affects people’s opportunities through records, scores, models, and reports.

What truly matters, therefore, is not making credit omnipresent, but ensuring that it is used where it properly belongs.

Credit can help markets reduce risk, but it must not become an all-purpose tool for judging people.

Credit can record specific acts of performance or nonperformance, but it must not be casually elevated into a judgment about character.

Credit can serve specific contexts, but it must not expand without limit across different contexts.

In a word, the central aim of a credit system is not to make the concept of credit ever broader, but to make its boundaries ever clearer.

References

[1] Josh Lauer, Creditworthy: A History of Consumer Surveillance and Financial Identity in America, 2017.

[2] Jonathan Weinberg, “Know Everything That Can Be Known about Everybody: The Birth of the Credit Report,” 2018.

[3] Mark Furletti, “An Overview and History of Credit Reporting,” 2002.

[4] Consumer Financial Protection Bureau, “Equal Credit Opportunity Act.”

[5] Federal Reserve, “Report to the Congress on Credit Scoring,” 2007.

[6] CFPB, “Tenant Background Checks Market Report,” 2022.

[7] General Office of the Communist Party of China Central Committee and General Office of the State Council, Opinions on Improving the Social Credit System, 2025.

Note: The author is Shanli Zhang. He is a doctoral student at the Law School of Shandong University. This article is a popularized version of the working paper titled From “Character” to “Risk”: Limited De-moralization, Eligibility Screening, and Boundary Governance in the History of American Credit Reporting. WeChat: 18811157736. Comments and corrections are welcome.

Author: Shanli Zhang

As the economy and society continue to develop and the credit system is gradually improved, credit repair has appeared with increasing frequency in policy discussions and public discourse. Public attention has risen significantly, particularly following the recent introduction by the People’s Bank of China of policy arrangements concerning “one-time credit repair.”[1][2] At the same time, however, there have been widespread misunderstandings that conflate “financial credit repair” with “public credit repair.” To address this confusion, this article uses a “two-track, three-pathway” framework to systematically explain the differences between financial credit repair and public credit repair in terms of their governing authorities, applicable parties, and repair mechanisms, thereby helping the public avoid conceptual confusion when interpreting and using these policies.

I. Background

China began gradually establishing its social credit system in the early 2000s and has continued to improve it alongside economic and social development. On this basis, credit repair has progressively developed into a “two-track, three-pathway” framework: financial credit repair led by the People’s Bank of China, together with the National Development and Reform Commission pathway and the market regulation pathway within public credit repair. This framework is shown in Figure 1:

Figure 1 Categories of Credit Repair in China

As shown in Table 1, financial credit repair is primarily led by the People’s Bank of China and constitutes an important component of China’s financial infrastructure, consistent with internationally accepted principles of credit-reporting governance. It focuses on correcting financial-behavior data concerning individuals and enterprises, such as records of overdue loans and credit-card payments. It generally affects access to financial services and restores financial credit through information correction or updating, adjustments to display rules, or removal upon expiration in accordance with laws and regulations. Public credit repair, by contrast, is led by authorities including the National Development and Reform Commission and the State Administration for Market Regulation. It focuses on social governance and compliance constraints and generally restores an entity’s social credit by ending the public disclosure of relevant information and lifting restrictions after the entity has corrected its misconduct and fulfilled its obligations. Both systems emphasize providing an “opportunity to correct mistakes,” but they differ in their scope of application and the boundaries of their respective mechanisms.

Table 1 The “Dual-Track System”: The Same Term with Different Meanings

II. The Background, Development, and Authoritative Policy Positions of the Three Major Credit Repair Systems

China’s credit repair system is administered by multiple government departments and primarily comprises the financial credit system, the public credit system led by the National Development and Reform Commission, and the market regulation system led by the State Administration for Market Regulation. Although all three systems involve credit repair, they differ in their backgrounds, development paths, and authoritative policy positions.

(I) Financial Credit Repair by the People’s Bank of China: From “Absolute Recordkeeping” to “Policy-Based Relief”

1. Background and Origins, 1999–2013

China’s financial credit-reporting system began relatively early. A credit-reporting administration was established as early as 1999, primarily to address information asymmetry in financial markets and assist financial institutions in assessing borrowers’ credit risks. During this period, the credit-reporting system was centered on “faithful recordkeeping,” requiring financial institutions to record the credit histories of individuals and enterprises fully and accurately in order to prevent financial risks. The concept of credit repair had not yet been clearly defined, and the system focused solely on the objective recording and management of credit information.

2. Development Path, 2013–2024

The promulgation of the Regulation on the Administration of the Credit Reporting Industry in 2013 marked a new stage in the development of China’s financial credit system. The Regulation provides that adverse personal information must be retained for five years from the date on which the relevant adverse conduct or event ends and must be deleted in accordance with the law after the five-year period expires.[3] This is not equivalent to the “arbitrary deletion of records”; rather, it is a rules-based removal process following the expiration of a statutory retention period. Within this framework, “active repair” in the traditional sense is reflected primarily in mechanisms such as information correction, dispute resolution, and adjustments to display rules.

3. Authoritative Policy Position, 2025

On October 27, 2025, Pan Gongsheng, Governor of the People’s Bank of China, announced that the central bank would implement a “one-time personal credit relief policy” in early 2026.[4] The policy is primarily directed at borrowers who defaulted on small consumer loans because of the pandemic or other force majeure events but have since fulfilled their repayment obligations. The relevant default information of eligible borrowers will be subject to policy-based adjustment in the credit-reporting system in accordance with applicable rules. On December 22, 2025, the People’s Bank of China issued the Notice on Arrangements for Implementing the One-Time Credit Repair Policy, further clarifying the applicable conditions and operational arrangements. It should be emphasized that the policy provides for eligible overdue information to be “excluded from display in accordance with applicable rules,” rather than permitting “paid deletion” or “whitewashing.” It is also a policy-based relief arrangement that eligible individuals may enjoy automatically without submitting an application.

(II) Public Credit Repair by the National Development and Reform Commission: From “Across-the-Board Sanctions” to “Tiered and Classified Restructuring”

1. Background and Origins, 2014–2018

With the issuance of the Planning Outline for the Development of the Social Credit System (2014–2020) in 2014, China began constructing a credit system covering the whole of society.[5] During this period, the Chinese government focused on promoting social integrity and establishing a cross-departmental joint disciplinary mechanism against untrustworthy conduct that covered the whole of society. By publicly disclosing information about untrustworthy conduct, restricting certain rights and interests of untrustworthy entities, and implementing disciplinary measures, the government sought disciplinary measures, the government sought to compel such entities to comply with laws and regulations and fulfill their social responsibilities.

Public credit repair was not clearly defined at the outset. Instead, the emphasis was placed on sanctioning and recording untrustworthy conduct. Once such conduct was confirmed, it would be recorded and publicly disclosed on the Credit China website. Repair mechanisms during this stage were relatively preliminary and relied mainly on untrustworthy entities applying for removal from a “blacklist” after proactively correcting their misconduct.

2. Development Path, 2019–2024

After 2019, as the social credit system was further improved, the National Development and Reform Commission began gradually adjusting the measures used to sanction untrustworthy conduct and introduced more flexible credit repair models. In particular, a repair model under which an application could be made once the misconduct had been corrected began to be implemented. This model allowed untrustworthy entities, after proactively correcting their conduct and fulfilling their statutory obligations, to apply to the relevant authorities to end the public disclosure of the relevant information and lift associated restrictions.

3. Authoritative Policy Position, 2025

On November 20, 2025, the National Development and Reform Commission issued the Measures for the Administration of Credit Repair, which will formally take effect on April 1, 2026.[6] The Measures provide more systematic and detailed rules for public credit repair, clearly specifying the repair standards and time limits applicable to different records of untrustworthy conduct. They also introduce, for the first time, a “tiered and classified” management model for information concerning untrustworthy conduct, under which different repair periods are established according to the seriousness of the misconduct. The introduction of this policy not only improves the precision of public credit repair administration but also provides untrustworthy entities with fairer opportunities.

(III) Credit Repair by the State Administration for Market Regulation: An Important Component of the Public Credit System

1. Background and Origins, 2014–2021

The credit repair policies of the State Administration for Market Regulation constitute an important part of the public credit system and are specifically directed at market entities. In the early stages, market regulators supervised enterprises through instruments such as the List of Enterprises with Abnormal Operations and the List of Seriously Untrustworthy and Unlawful Entities. The aim was to increase overall public awareness of creditworthiness and compliance with the law through transparent information disclosure and disciplinary mechanisms.

2. Development Path, 2021–2024

In 2021, the State Administration for Market Regulation issued the Measures for the Administration of Credit Repair in Market Regulation, marking the institutionalization and standardization of credit repair mechanisms in the field of market regulation.[7] The Measures provided enterprises with clear pathways for credit repair, including applications for removal from the List of Enterprises with Abnormal Operations and the termination of untrustworthiness-related management measures. At the same time, the State Administration for Market Regulation accelerated the development of a “national unified platform” and promoted the “one-stop credit repair service” reform, simplifying repair procedures and improving the efficiency with which enterprises could restore their credit.

3. Authoritative Policy Position, 2025

On December 25, 2025, the State Administration for Market Regulation will implement the latest revised version of the Measures for the Administration of Credit Repair in Market Regulation. The revision further expands the scope of credit repair and establishes temporary credit repair arrangements for “enterprises undergoing reorganization or settlement.” During the implementation of a reorganization plan or settlement agreement, an enterprise may apply for temporary credit repair by submitting the relevant ruling or other legal documents issued by a people’s court. The relevant information concerning untrustworthy conduct may then be temporarily concealed, and management measures that could affect the implementation of the reorganization or settlement may be lifted.[8] This measure helps reduce the prolonged effects of credit sanctions, supports enterprises in resuming operations and participating in market competition, and is consistent with the policy objective of improving the business environment.

III. A Comprehensive Comparison: The Logic and Core Differences Among the Three Major Credit Repair Pathways

As shown in Table 2, although China’s two categories of credit repair—financial credit repair and public credit repair—both serve the objective of restoring the credit of entities that have engaged in untrustworthy conduct, they differ in their underlying logic, scope of application, repair pathways, and implementation mechanisms. Financial credit repair is concentrated primarily in the financial sector and mainly concerns the correction of financial data. Public credit repair led by the National Development and Reform Commission focuses on social compliance and primarily addresses the correction of untrustworthy conduct. Credit repair under market regulation, led by the State Administration for Market Regulation, focuses on the compliance of enterprise conduct, particularly the restoration of enterprises’ operating qualifications and market credit in the commercial sphere.

Table 2 A Comprehensive Comparison of the Two Categories of Credit Repair

(I) Financial Credit Repair

Financial credit repair led by the People’s Bank of China follows the principle that “recording itself constitutes a sanction.” Financial institutions record customers’ defaults in credit reports, while the core of repair lies in restoring the credit eligibility and borrowing capacity of the relevant individuals or entities through information correction or updating, adjustments to display rules, or removal upon expiration in accordance with laws and regulations, rather than arbitrarily “deleting history.”

Financial credit repair is driven primarily by two factors. The first is policy-based relief under particular circumstances, such as relief arrangements introduced in response to the pandemic or other force majeure events, under which information relating to eligible defaulters may be subject to adjustments in its display in accordance with applicable rules. The second is automatic removal following the expiration of the statutory retention period, meaning that adverse financial records are removed from credit reports in accordance with the law after five years.

Financial credit repair applies to credit records submitted by financial institutions and commonly concerns defaults involving small consumer loans, outstanding credit-card balances, and similar obligations. The principal purpose of repair measures is to restore the financial credit of individuals and enterprises in accordance with laws and regulations, enabling them to regain access to loans, credit cards, and other financial services.

(II) Public Credit Repair

1. Public Credit Repair Led by the National Development and Reform Commission

Public credit repair covers the field of social credit, including information concerning the social conduct of individuals and enterprises, administrative penalties, and related matters. Unlike financial credit repair, which focuses on credit-reporting data, public credit repair places greater emphasis on social compliance and lawful conduct and seeks to restore an entity’s social credit status after it has corrected its misconduct and fulfilled its obligations.

The governance logic of public credit repair is that “public disclosure itself constitutes a sanction.” Once the conduct of an untrustworthy entity is recorded and publicly disclosed, the entity becomes subject to social and regulatory constraints. After correcting its misconduct and fulfilling its statutory obligations, the entity may apply, in accordance with applicable rules, to end the public disclosure, lift the restrictions, and restore its eligibility to engage in the relevant activities.

2. Credit Repair under Market Regulation Led by the State Administration for Market Regulation

Credit repair under market regulation is an important component of the public credit repair system and focuses on credit repair at the enterprise level. Led by the State Administration for Market Regulation, this pathway principally operates through regulatory lists such as the List of Enterprises with Abnormal Operations and the List of Seriously Untrustworthy and Unlawful Entities. It uses credit repair mechanisms to help enterprises restore their market-access qualifications and credit status.

Credit repair under market regulation follows the principle that “listing itself constitutes a sanction.” Once an enterprise is included on a list of abnormal operations or serious untrustworthiness, it becomes subject to restrictions arising from the relevant regulatory measures. The core of the repair process is the enterprise’s removal from the relevant list in accordance with laws and regulations after it has fulfilled its statutory obligations or completed the required corrective measures, thereby restoring its qualification to conduct normal business activities in the market.

The drivers of credit repair under market regulation include the fulfillment of statutory obligations: after correcting unlawful conduct and completing the required rectification, an enterprise may apply for removal from the relevant list. In addition, mechanisms such as a “green channel” for bankruptcy reorganization may provide more convenient credit repair arrangements for particular types of enterprises, thereby reducing the prolonged effects of credit sanctions.

IV. Challenges and Public Misunderstandings Concerning Credit Repair

Although the advancement of credit repair policies has positive implications for strengthening social integrity and economic vitality, public misunderstandings remain a challenge in their practical implementation. Many people confuse financial credit repair with public credit repair and mistakenly believe that all types of records concerning untrustworthy conduct can be eliminated by applying for their “deletion” or “whitewashing.” In reality, the two differ in both their scope of application and the actions taken to achieve repair. Financial credit repair focuses on the correction of credit-reporting information and adjustments to display rules, whereas public credit repair focuses on ending public disclosure and lifting restrictions after misconduct has been corrected. Such misunderstandings may also foster a gray industry operating under the name of “credit-report repair,” in which unscrupulous organizations charge substantial fees while promising to “erase records.” Such promises are generally incapable of being lawfully fulfilled and may instead result in fraud and legal disputes, thereby disrupting the proper operation of the credit repair system.

In addition, financial credit repair and public credit repair are led by different government authorities, including the People’s Bank of China, the National Development and Reform Commission, and the State Administration for Market Regulation. Because the boundaries between the systems and their points of access are not sufficiently intuitive, members of the public may repeatedly seek advice or submit applications to different departments. Differences in the standards or explanations applied by those departments may even lead to procedural mismatches, increasing both time and administrative costs and reducing the efficiency of policy implementation.

The government therefore needs to further improve clarity in both information disclosure and policy implementation, ensuring that the public can properly understand and use these policies. Particular emphasis should be placed on explaining “what can be repaired, which authority should be contacted, and how the process works.” The applicable scope, application channels, required materials, and time limits for different types of repair should be clearly specified, while cross-departmental information sharing and procedural integration should be advanced. At the same time, continuing public education and risk warnings are needed to reduce misunderstanding and misuse.

Finally, if the definition and scope of credit repair are not clearly delineated, the financial credit system may be adversely affected, particularly through the weakening of the risk-warning function of “faithful recordkeeping.” One of the major objectives of financial credit reporting is to prevent financial risks and protect financial institutions from excessive risk exposure. If repair is excessive or abused, the credibility of the credit-reporting system will be undermined, potentially affecting the stability of financial markets. Maintaining the rigor and transparency of repair mechanisms and ensuring that they apply only to eligible individuals and entities in accordance with laws and regulations are therefore essential to the proper functioning of the credit system.

Overall, credit repair policies must maintain a careful balance in their implementation. They should provide sufficient repair opportunities to help entities that have engaged in untrustworthy conduct reintegrate into society, while also preventing abuse and improper practices and ensuring that repair procedures remain fair and transparent.

V. Conclusion

The “dual-track, three-pathway” credit repair system led by the People’s Bank of China, the National Development and Reform Commission, and the State Administration for Market Regulation applies to different parties and operates through different mechanisms. Financial credit repair focuses primarily on the presentation and updating of credit-reporting information. Public credit repair focuses on ending public disclosure and lifting restrictions after misconduct has been corrected. Credit repair under market regulation focuses on removal from regulatory lists and the restoration of market access. Together, these three repair pathways reflect an equal emphasis on sanctions and rehabilitation: while maintaining necessary constraints, they provide a route back for entities that have corrected their misconduct and fulfilled their obligations, thereby improving governance effectiveness and public trust.

Looking ahead, the further improvement of credit repair mechanisms requires clearer institutional distinctions among the different types of repair pathways in order to prevent confusion. Cross-departmental coordination should also be strengthened, information sharing and procedural integration should be promoted, and the efficiency of repair should be improved. Public education and risk warnings should be treated as long-term priorities to reduce misunderstanding and abuse. The objective of credit repair is to ensure that, after correcting their misconduct and fulfilling their obligations, entities that have engaged in untrustworthy conduct can restore their credit through legitimate channels and continue participating in social and economic activities, maintaining a balance between “compassion and order.”

References

[1] People’s Bank of China, “Notice of the People’s Bank of China on Arrangements for Implementing the One-Time Credit Repair Policy” [EB/OL], December 22, 2025, available at https://www.pbc.gov.cn/goutongjiaoliu/113456/113469/2025122116371667030/index.html (last accessed December 24, 2025).

[2] People’s Bank of China, “Questions and Answers with the Press Concerning the Notice of the People’s Bank of China on Arrangements for Implementing the One-Time Credit Repair Policy” [EB/OL], December 22, 2025, available at https://www.pbc.gov.cn/goutongjiaoliu/113456/113469/2025122116421625696/index.html (last accessed December 24, 2025).

[3] State Council, Regulation on the Administration of the Credit Reporting Industry, State Council Order No. 631, promulgated January 21, 2013, effective March 15, 2013, Article 16.

[4] Xinhua News Agency, “The People’s Bank of China Is Studying the Implementation of a One-Time Personal Credit Relief Policy” [EB/OL], October 27, 2025, available at http://www.news.cn/fortune/20251027/39190dbb704141a197ad9e8e7213b754/c.html (last accessed December 24, 2025).

[5] State Council, “Notice of the State Council on Issuing the Planning Outline for the Development of the Social Credit System (2014–2020),” State Council Document No. 21 [2014], June 14, 2014 [EB/OL], available at https://www.gov.cn/gongbao/content/2014/content_2711418.htm (last accessed December 24, 2025).

[6] National Development and Reform Commission, Measures for the Administration of Credit Repair [EB/OL] (PDF), available at https://www.ndrc.gov.cn/xxgk/zcfb/fzggwl/202511/P020251126424276238205.pdf. The document states, among other matters, that “these Measures shall take effect on April 1, 2026, and the Measures for the Administration of Credit Information Repair Following the Correction of Untrustworthy Conduct (Trial) shall be repealed” (last accessed December 24, 2025).

[7] State Administration for Market Regulation, “Notice of the State Administration for Market Regulation on Issuing the Measures for the Administration of Credit Repair in Market Regulation,” SAMR Credit Regulation Document No. 3 [2021], issued July 30, 2021, effective September 1, 2021 [EB/OL], available at https://www.gov.cn/zhengce/zhengceku/2021-08/04/content_5629304.htm (last accessed December 24, 2025).

[8] State Administration for Market Regulation, Measures for the Administration of Credit Repair in Market Regulation, State Administration for Market Regulation Order No. 107, promulgated November 21, 2025, effective December 25, 2025 [EB/OL], available at https://www.samr.gov.cn/zw/zfxxgk/fdzdgknr/fgs/art/2025/art_02b9d3e6f31a4cc38079901ab49994d5.html (last accessed December 24, 2025).

Note: The author is Shanli Zhang. He is a doctoral student at Shandong University. The original title of this article was “A Comprehensive Analysis of China’s Credit Repair System: The ‘Dual-Track’ Model of Financial Credit and Public Credit.” ItDual-Track’ Model of Financial Credit and Public Credit.” It is the full-text version of a roundtable presentation delivered at the “Eighth Credit Rule of Law · Shaoshan Luntang Forum,” held at Xiangtan University on December 21, 2025. WeChat: 18811157736. Comments and corrections are welcome.

Author: Shanli Zhang

Against the backdrop of the continued development and deepening of China’s social credit system, public concern over issues relating to “credit” has reached an unprecedented level. As of December 30, 2025, a total of 8,485,046 dishonest persons subject to enforcement were publicly listed nationwide.[1] However, a common misconception is to conflate “deadbeat debtors” in the field of judicial enforcement—the legal term being “dishonest persons subject to enforcement”—with ordinary credit problems such as overdue bank payments, leading people to assume that all forms of credit impairment can be addressed through a unified credit restoration mechanism. This conceptual confusion may not only cause individuals or enterprises to “knock on the wrong door and apply the wrong remedy” when seeking relief, but also create fertile ground for gray-market businesses operating under the banner of “credit report repair.”

I. The Institutional Origin and Constitutive Elements of “Deadbeat Debtor” Status: A Sanctioning Status Arising from Judicial Enforcement

Before discussing how such status may be “restored,” it is first necessary to clarify the essential nature of a “deadbeat debtor.” It is neither a simple social label nor the result of a credit score. Rather, it is a sanctioning status arising from a specific judicial enforcement procedure and carrying a clear legal definition. Understanding its distinctive judicial origin is an indispensable foundation for examining all subsequent questions concerning restoration.

(I) Legal Definition and Origin of “Deadbeat Debtor” Status

The widely used expression “deadbeat debtor” is not a legal term. Its formal designation within the legal framework is “dishonest person subject to enforcement.” This system does not originate from the banking credit reporting system or from the broader social credit system. Instead, it derives directly from the Civil Procedure Law of the People’s Republic of China and the Several Provisions of the Supreme People’s Court on the Publication of Information Concerning the List of Dishonest Persons Subject to Enforcement. It constitutes a judicial sanction imposed during compulsory enforcement proceedings by a people’s court in response to specified forms of dishonest conduct.

The central purpose of establishing this system is clear: by using credit-based sanctions as a powerful deterrent and imposing pressure on various aspects of a dishonest person’s life, the system seeks to compel that person to voluntarily perform the obligations determined in an effective legal instrument. It thereby aims to address the long-standing problem of “difficulties in enforcement” that has troubled judicial practice and to firmly safeguard the authority of judicial decisions.

(II) Statutory Circumstances for Inclusion on the Dishonesty List

The legal procedure for determining that a person subject to enforcement is a “deadbeat debtor” and placing that person on the dishonesty list is highly cautious. Two indispensable preconditions must be satisfied simultaneously: first, there must be an effective legal instrument, such as a judgment or ruling; and second, the person subject to enforcement must have committed a specific form of dishonest conduct prescribed by law.

In other words, the mere existence of a debt does not directly result in a person being classified as a “deadbeat debtor.” The key question is whether, during the enforcement stage, the person has engaged in subjectively malicious and dishonest conduct. Article 1 of the Several Provisions of the Supreme People’s Court on the Publication of Information Concerning the List of Dishonest Persons Subject to Enforcement expressly identifies six principal categories of dishonest conduct:

1. Refusing to perform the obligations determined in an effective legal instrument despite having the ability to do so;

2. Obstructing or resisting enforcement by means such as fabricating evidence, violence, or threats;

3. Evading enforcement through sham litigation, sham arbitration, concealment or transfer of assets, or other means;

4. Violating the property reporting system;

5. Violating an order restricting consumption;

6. Refusing, without legitimate reason, to perform an enforcement settlement agreement.

(III) The Critical Distinction Between “Dishonesty” and “Inability to Perform”

To prevent the excessive application of sanctions, judicial policy has long and repeatedly emphasized the need to strictly distinguish “dishonest persons subject to enforcement” from “persons subject to enforcement who genuinely lack the ability to perform,” namely, those who are “incapable of performance.” The latter may have temporarily or permanently lost the ability to perform because of objective circumstances, such as corporate bankruptcy or an individual’s loss of working capacity. Such inability does not automatically constitute “dishonesty” in the legal sense.

This important distinction clearly demonstrates that the target of the dishonest-persons-under-enforcement system is subjectively malicious and objectively dishonest conduct involving “non-performance” or “evasion of performance.” Its institutional logic emphasizes responsibility for conduct rather than punishment for economic failure itself.

Precisely because “deadbeat debtor” status constitutes a judicial sanction, the legal consequences faced by such persons extend far beyond ordinary credit-record issues. A cross-departmental and cross-sectoral network of coordinated sanctions has therefore been established.

II. The Principal Consequences of “Deadbeat Debtor” Status: The Coordinated Sanctions Mechanism

The coordinated sanctions mechanism is the most deterrent component of the system governing dishonest persons subject to enforcement. Based on the principle that “dishonesty in one area results in restrictions everywhere,” the mechanism uses information sharing and coordinated supervision among people’s courts, government departments, financial institutions, industry associations, and other entities to transform an otherwise isolated judicial sanction into a society-wide network of restrictions. This substantially increases the cost of dishonest conduct, minimizes the room available for dishonest persons to operate, and compels them to perform their legal obligations.

(I) Operation of the Coordinated Sanctions Mechanism

The mechanism operates in a straightforward manner. People’s courts at all levels enter information concerning dishonest persons subject to enforcement into the unified database maintained by the Supreme People’s Court and notify “relevant government departments, financial regulatory authorities, financial institutions, public institutions performing administrative functions, industry associations, and other entities.” Upon receiving such information, these entities impose corresponding restrictive measures on the listed persons in accordance with the laws, regulations, and relevant rules governing their respective fields.

(II) Principal Sanctions

Once an individual or enterprise is included on the list of dishonest persons subject to enforcement, it will face a series of severe coordinated sanctions, including but not limited to the following:

• Restrictions on financing and credit: When reviewing loan applications, processing credit card applications, and providing other services, financial institutions may impose strict restrictions or directly refuse to provide the relevant financial services, thereby effectively cutting off access to financing.
• Restrictions on market access and qualification recognition: Dishonest persons subject to enforcement may be strictly restricted or directly excluded from key areas such as government procurement, bidding and tendering, administrative approvals, government support, and qualification recognition.
• Restrictions on high-value consumption and consumption not necessary for daily life or work: This is the sanction most familiar to the public. Prohibited activities include traveling by airplane, occupying soft-sleeper berths on trains, or traveling in second-class or higher cabins on ships; engaging in high-value consumption at star-rated hotels, nightclubs, golf courses, and similar venues; and enrolling one’s children in high-fee private schools.
• Restrictions on holding important positions: Dishonest persons subject to enforcement may be prohibited from serving as directors, supervisors, or senior executives of companies, as well as legal representatives of public institutions, senior executives of financial institutions, and holders of other important positions.

In the face of such severe coordinated sanctions, seeking credit restoration inevitably becomes the preferred course of action for dishonest persons or entities. However, the path to restoration is not unobstructed. It is first necessary to clearly define the boundaries between the judicial system and the various credit restoration systems.

III. Clarifying the Boundaries: Fundamental Differences Between Judicial Sanctions and the Three Categories of Credit Restoration Systems

The greatest public misunderstanding concerning credit restoration lies in the conflation of systems governed by different authorities, based on different regulatory rationales, and operating through different restoration mechanisms.

(I) Overview of China’s “Dual-Track, Three-Pathway” Credit Restoration System

As China’s credit restoration system has developed, it has gradually formed a clear “dual-track, three-pathway” structure. The “dual tracks” refer to financial credit restoration and public credit restoration. The public credit restoration track is further divided into two principal pathways: one coordinated by the National Development and Reform Commission and applicable across society as a whole, and the other led by the State Administration for Market Regulation and focused on business entities.

(II) Comparison of the Core Differences Among the Four Systems

To understand the restoration pathway available to a “deadbeat debtor,” it is first necessary to distinguish the judicial enforcement system from the three principal credit restoration systems. Table 1 provides an in-depth comparison across four core dimensions:

Table 1. Comparison of the Four Systems Related to Credit Restoration

The fundamental differences among these systems in terms of responsible authorities, regulatory rationale, forms of sanctions, and legal basis determine that the credit restoration of a “deadbeat debtor” cannot bypass judicial procedures. Instead, it must follow a specific sequence and pathway.

IV. The Path to Restoration: The Correct Sequence and Coordination Among Multiple Pathways

The credit restoration of a “deadbeat debtor” is a systematic undertaking rather than a single act. It requires the dishonest person or entity to first fulfill its obligations at the judicial level before proceeding in an orderly manner to address issues under the other three credit restoration systems.

(I) The Absolute Prerequisite: “Judicial Delisting” Through Completion of the Judicial Enforcement Procedure

For a “deadbeat debtor,” the sole and absolute starting point for every restoration pathway is to perform the relevant legal obligations and obtain “judicial delisting” from the enforcement court that made the original inclusion decision—that is, the deletion of the relevant information from the list of dishonest persons subject to enforcement. Any attempt at restoration that bypasses the court is institutionally ineffective.

Under Article 10 of the Several Provisions of the Supreme People’s Court on the Publication of Information Concerning the List of Dishonest Persons Subject to Enforcement, the principal statutory circumstances permitting “judicial delisting” include the following:

• Full performance: The person subject to enforcement has performed the obligations determined in the effective legal instrument, or the people’s court has completed enforcement.
• Performance of a settlement agreement: The parties have reached an enforcement settlement agreement, and the agreement has been fully performed.
• Application by the enforcement applicant: The enforcement applicant submits a written request for the deletion of the dishonesty information, and the people’s court approves the request after review.
• No assets available for enforcement: Following termination of the current enforcement procedure, the court has conducted at least two searches for the assets of the person subject to enforcement through the online enforcement inquiry and control system, no assets available for enforcement have been identified, and neither the enforcement applicant nor any other person has provided valid leads concerning assets.
• Change in the enforcement procedure: The people’s court has lawfully ruled to suspend enforcement against the dishonest person subject to enforcement because of trial supervision proceedings or bankruptcy proceedings, or has lawfully ruled not to enforce or to terminate enforcement.

In addition, where a prescribed period of inclusion applies to the relevant dishonest conduct, the people’s court must delete the dishonesty information within three working days after the inclusion period expires.

Once the relevant conditions have been satisfied and the court has deleted the dishonesty information, the corresponding coordinated sanctions, such as restrictions on high-value consumption, will be lifted. This constitutes the legal foundation and “passport” for subsequent engagement with the other credit restoration systems.

(II) Relationship with Financial Credit Restoration: No Substitution, but Institutional Linkage Exists

The financial credit restoration mechanism cannot, as a matter of institutional design, directly affect or replace a person’s dishonest status at the judicial level. A “deadbeat debtor” cannot have the status of dishonest person subject to enforcement removed by applying to the People’s Bank of China or to any financial institution.

Nevertheless, a critical linkage exists between the two systems. People’s courts transmit information from the list of dishonest persons subject to enforcement to the central bank’s credit reporting system, and credit reporting agencies record such information in credit reports in accordance with the law.

An important detail following restoration must not be overlooked. Even after the court has completed “judicial delisting” and lifted the sanctions operating in real time, the relevant adverse records will, under the Regulations on the Administration of the Credit Reporting Industry, remain in an individual’s credit report for five years from the date on which the adverse conduct or event terminates. A clear distinction must therefore be drawn between the “lifting of real-time sanctions” and the “statutory retention of historical credit records.” These are two entirely different concepts.

(III) Relationship with Public Credit Restoration: A Subsequent Follow-On Mechanism

For a “deadbeat debtor,” the public credit restoration system coordinated by the National Development and Reform Commission functions as a subsequent follow-on mechanism rather than an independent starting pathway.

The correct sequence of restoration is as follows:

First, the people’s court must lawfully lift the dishonesty sanctions and complete the “judicial delisting.” Only thereafter may the dishonest person or entity apply, in accordance with the Measures for the Administration of Credit Restoration, to platforms such as the Credit China website for the cessation of publication of serious dishonesty information relating to the judicially determined dishonest conduct.

(IV) Relationship with Market Regulation Credit Restoration: A Parallel Mechanism for Business Entities

This restoration pathway principally applies to enterprises, individually owned businesses, and other business entities that have been classified as “deadbeat debtors.” Its relationship with judicial restoration may be characterized as parallel.

This means that even after an enterprise has completed “delisting” at the judicial level, if it has also been placed by the market regulation authority on the list of abnormal business operations or the list of seriously unlawful and dishonest entities for other reasons—such as failing to submit an annual report on time or being unreachable at its registered address—it must still independently apply to the market regulation authority that made the original inclusion decision for removal from the relevant list in accordance with the Measures for the Administration of Credit Restoration by Market Regulation Authorities. The two processes do not substitute for one another and must be addressed separately.

V. Conclusion and Summary of the Core Points

The essence of “deadbeat debtor” status, or the status of a dishonest person subject to enforcement, is that it constitutes a sanctioning status arising from judicial enforcement proceedings rather than a simple credit-scoring issue. Accordingly, its restoration must follow a specific pathway under which the performance of judicial obligations is the absolute prerequisite. Clarifying the boundary between judicial sanctions and social credit governance is of vital importance to safeguarding judicial authority, ensuring the sound operation of the credit restoration system, and guiding dishonest persons and entities toward the appropriate forms of relief.

For ease of understanding and practical application, the three principal conclusions and reminders of this article are summarized as follows:

1. “Deadbeat debtor” status is a judicial matter, and restoration begins with the court: The creation and termination of the status of a dishonest person subject to enforcement are ultimately determined by the people’s court. This reflects the basic principle of credit governance that “the authority that makes the determination is responsible for the restoration.” Any attempt to bypass the enforcement court and “clean up” the status of a dishonest person subject to enforcement through financial credit restoration or public credit restoration channels lacks a regulatory basis and is bound to fail. The only correct starting point for restoration is to perform the relevant legal obligations and obtain “judicial delisting” from the court.

2. Restoration is an institutional exit mechanism, not the deletion of historical records: Completion of credit restoration means that real-time sanctions, such as restrictions on high-value consumption, are lifted and the publication of the relevant dishonesty information is discontinued, allowing the person or entity to return to normal social and economic activities. It does not mean that every historical trace will be deleted. In particular, relevant adverse records in financial credit reports will remain for five years from the date on which the relevant conduct terminates, as required by law. Dishonest persons and entities should therefore establish appropriate expectations.

3. Credit restoration is legally provided free of charge; beware of “credit report repair” scams: All credit restoration procedures administered by official authorities, including courts, the National Development and Reform Commission, and the State Administration for Market Regulation, are free of charge. Any intermediary service claiming that it can use paid “internal operations” or “technical methods” to remove adverse records prematurely or in violation of applicable rules belongs to the gray market. Such services may not only cause financial losses but may also involve unlawful conduct. Applications should always be submitted lawfully through official channels to avoid fraud.

References

[1]China Enforcement Information Online (zxgk.court.gov.cn): https://zxgk.court.gov.cn/.

Note: The author is Shanli Zhang. He is a doctoral candidate at the School of Law, Shandong University. The original title of the article was “An Analysis of the Formation Mechanism of ‘Deadbeat Debtors’ and Their Normative Relationship with the Credit Restoration System.” WeChat: 18811157736. Comments and corrections are welcome.

Order No. 4 [2021] of the People’s Bank of China

The Measuresfor the Administration of Credit Reporting Services, adopted on September 17, 2021 at the ninth executive meeting of the People’s Bank of China in 2021, is hereby issued   and shall come into force as of January 1, 2022.

Yi Gang, Governor of the People’s Bank of China

September 27, 2021

Measures for the Administration of Credit Reporting Services

Chapter I  General Provisions

Article 1 This Measures is formulated in accordance with the Law of the People Republic of China on the People Bank of China, the Personal Information Protection Law of the People Republic of China, the Regulation on the Administration of Credit Reporting Industry, and other applicable laws and regulations to regulate credit reporting services and  related activities, protect the legitimate rights and interests of information subjects, promote the healthy development of the credit reporting industry, and strengthen the social credit system.

Article 2 This Measures applies to the credit reporting services and related activities conducted within the mainland of the People’s Republic of China in relation to corporations and unincorporated organizations (hereinafter referred to as “enterprises”) and individuals.

Article 3 For the purpose of this Measures, credit reporting services refer to the collection, organization, preservation, and processing of the credit information of enterprises and individuals and the provision of such credit information to information users.

For the purpose of this Measures, credit information refers to the basic information, lending information, and other relevant information lawfully collected to identify and assess the credit status of enterprises and individuals to facilitate financial and other activities, as well as the analyses and evaluations made based on the forgoing information.

Article 4 Businesses that engage in credit reporting services for individuals shall lawfully obtain the consumer credit reporting agency license from the People’s Bank of China (“PBC”); businesses that engage in credit reporting services for enterprises shall lawfully complete the filing process for commercial credit reporting agencies; businesses that engage in credit rating services shall lawfully complete the filing process for credit rating agencies.

Article 5 Financial institutions shall not enter a business relationship with any market entity for its credit services if the market entity is not legally qualified to provide credit reporting services.

For the purpose of this Measures, financial institution refers to any institution that engages in financial business under the regulation and supervision of the financial regulatory authority under the State Council.

Local financial organizations regulated and supervised by local financial regulatory authorities are subject to the provisions of this Measures on financial institutions.

Article 6 Any businesses that engage in credit reporting services and related activities  shall protect the lawful rights and interests of the information subjects, ensure the safety and security of information, and prevent the leakage, loss, destruction, or misuse of credit information, and shall not undermine state secrets, invade personal privacy, or commit breach of confidential business information.

Credit reporting services and related activities shall be conducted on an independent, objective, and impartial basis and shall not violate relevant laws and regulations or offend public order or good morals.

Chapter II  Collection of Credit Information

Article 7 Consumer credit information shall be collected in a lawful and proper manner, in accordance with the principles of data minimization, and strictly on an “as needed” basis.

Article 8 A credit reporting agency shall not collect credit information:

(1) through deception, coercion, or inducement;

(2) by charging a fee from the information subjects;

(3) through illegitimate channels; or

(4) through any other method that harms the legitimate rights and interests of the information subjects.

Article 9 Where a credit reporting agency obtains credit information from an information provider, the credit reporting agency shall establish relevant rules to conduct the necessary checks on such matters as the source, quality, and safety and security of such information and the authorization from the information subjects.

Article 10 Credit reporting agencies and information providers, in conducting business and collaborations, shall comply with laws and regulations including the Personal Information Protection Law of the People Republic of China and specify, through an agreement or other means, the principles governing information collection and their respective rights, obligations, and responsibilities in relation to such matters as the obtainment of customer consent; the collection, processing, and correction of information; dispute resolution; and information safety and security.

Article 11 Any credit reporting agency that engages in consumer credit reporting services shall develop an information collection plan and report to the PBC such matters as the data items to be collected, source of information, methods of collection, and rules governing the protection of information subjects as well as any changes to the foregoing.

Article 12 Any credit reporting agency that collects consumer credit information shall obtain consent from the information subjects and expressly inform them of the purpose of collection, except for information that is made publicly available according to laws and  regulations.

Article 13 Where a credit reporting agency obtains personal consent through an information provider, the information provider shall fulfil the informing obligation to relevant information subjects.

Article 14 Each consumer credit reporting agency shall report to the PBC its partnering information providers that collect, organize, process, and analyze consumer credit information.

A consumer credit reporting agency shall standardize its collaboration agreements with information providers. An information provider shall accept the risk assessments conducted by consumer credit reporting agencies and the fact checks by the PBC with respect to its handling of consumer credit information.

Article 15 Enterprise credit information shall be collected for lawful purposes and not in a manner that constitutes a breach of confidential business information.

Chapter III Organization, Preservation, and Processing of Credit Information

Article 16 A credit reporting agency shall observe the principles of objectivity in    organizing, preserving, and processing credit information and shall not tamper with the original information.

Article 17 A credit reporting agency shall take Measures to improve the accuracy of information in its credit reporting system and ensure the quality of information.

Article 18 Where a credit reporting agency identifies any error in credit information during information organization, preservation, or processing, it shall promptly notify the relevant information provider to make corrections if the error is transmitted from the information provider, or promptly correct the error and optimize its internal processing procedures for credit information if the error originates from its internal processing.

Article 19 A credit reporting agency shall cross-check the information obtained from  different information providers and verify and resolve inconsistencies in a timely manner.

Article 20 Each credit reporting agency shall retain an individual’s negative entry for five years from the day when the negative behavior or event ceases to exist. 

Upon the expiration of this retention period, the negative entry shall be removed by the credit reporting agency from its external services and applications, or, if it is to be used as sample data, be anonymized.

Chapter IV Provision and Use of Credit Information

Article 21 In providing credit reporting products and services to external parties, a credit reporting agency shall observe the principle of fairness by not establishing any unreasonable commercial terms and conditions that restrict the use of information by different information users or by taking advantage of its position to provide discriminatory or exclusive products and services.

Article 22 Credit reporting agencies shall take appropriate Measures to check the identity, business qualifications, purpose of use of information, and other pertinent aspects of information users.

Credit reporting agencies shall assess the security and compliance management Measures of the networks and systems used by information users to access the credit reporting system, and shall monitor their queries. A credit reporting agency shall promptly verify any security risk or abnormal behavior and, upon discovering any illegal activity or misconduct, terminate its service.

Article 23 Each information user shall take the necessary Measures to ensure that it has obtained the consent of the relevant information subjects when querying consumer credit information and that it is using such information for the purposes agreed upon.

Article 24 An information user shall use the credit information provided by a credit reporting agency for lawful and legitimate purposes and shall not misuse it.

Article 25 Each individual information subject is entitled to his own credit report twice a year without charge. Credit reporting agencies may provide such credit report services over the internet, at places of business, or by other means.

Article 26 An information subject believing that there is any error or omission in its credit information may file a dispute with the relevant credit reporting agency or information provider. An information subject believing that its legitimate rights and interests are violated may file a complaint with the relevant branch of the PBC. Such disputes and complaints shall be handled in accordance the Regulation on the Administration of Credit Investigation Industry and other relevant provisions.

Article 27 No credit reporting agency may charge information subjects a fee for removing or not collecting negative entries.

Article 28 A credit reporting agency that provides credit reports and other credit information products and services shall present the requested credit information in an objective manner and provide explanations on the contents and specialized terms therein.

An information subject has the right to require a credit reporting agency to include a note of dispute or a consumer statement in its credit report.

Article 29 Any credit reporting agency that provides credit assessment products and services, such as credit profiling, scoring, or rating, shall establish the assessment criteria, which may not contain any element that is irrelevant to the credit status of the information subjects.

Before officially providing credit assessment products or services to external parties, a credit reporting agency shall perform the necessary internal tests and assessment and verification procedures to ensure its evaluation rules can be explained and the information is traceable.

Credit reporting agencies that provide credit rating products and services for economic entities or debt financing instruments shall conduct such businesses in accordance with the Interim Measures for the Administration of Credit Rating Industry (Order No. 5 [2019] of the People’s Bank of China, the National Development and Reform Commission, the Ministry of Finance, and the China Securities Regulatory Commission) and other relevant provisions.

Article 30 A credit reporting agency that offers anti-credit fraud products and services shall establish the criteria for determining fraudulent credit information.

Article 31 A credit reporting agency that offers credit information query, credit evaluation, and anti-credit fraud products and services shall submit the following to the PBC or one of its branches at or above the level of central sub-branch of the capital city of a province or autonomous region:

(1) the template and contents of its credit report;

(2) the assessment methodology, models, and major analytical dimensions and elements of its credit assessment  products and services; and

(3) for anti-fraud products and services, the sources of data and determination criteria for fraudulent credit information.

Article 32 No credit reporting agency may:

(1) make promises on the results of credit assessment;

(2) advertise products and services using implicit languages in regard to the credit assessment results;

(3) market its products or services in the name of government agencies or trade associations without their consent;

(4) provide credit reporting products or services to information subjects or information users through coercion, deception, or inducement;

(5) engage in false advertising for its credit reporting products or services; or

(6) offer any other credit reporting products or services that would undermine the objectivity and impartiality of credit reporting services.

Chapter V Safety and Security of Credit Information

Article 33 Credit reporting agencies shall implement the cybersecurity multi-level protection scheme; establish security protocols for relevant business activities, equipment, and facilities; and take effective safeguards to ensure the safety and security of the credit reporting system.

Article 34 Each consumer credit reporting company and each commercial credit reporting company that preserves or processes the credit information of 1,000,000 or more enterprises shall meet the following requirements:

(1) the core business information system has attained Level 3 in the cybersecurity multi-level protection scheme or above;

(2) the positions of head of information security and head of personal information protection have been established and are assumed by the officers designated in the corporate articles of association; and

(3) a specialized department is set up which is responsible for information security and protection of personal information and for periodically reviewing the enforcement of rules and regulations on credit reporting services, system safety and security, and protection of personal information.

Article 35 A credit reporting agency shall ensure the safety and security of the operational facilities and equipment, security control facilities and equipment, and internet application programs of its credit reporting system; properly manage the system’s day-to-day operation and maintenance; and ensure the safety and security of the physical system, communication networks, zone boundaries, computing environment, and administration center, to protect the credit reporting system from unauthorized access and sabotage.

Article 36 A credit reporting agency shall properly manage the personnel-related safety and security issues in relation to recruitment, termination, evaluation, safety and security education, training, and visitor management.

Article 37 A credit reporting agency shall strictly limit the authority and scope of its staff members who can query and access credit information through internal systems.

A credit reporting agency shall retain the activity log of its staff members ’ query and access of credit information, which should clearly record the time, method, contents, and purpose of such queries and access.

Article 38 A credit reporting agency shall have in place an emergency response framework such that, at the occurrence or likely occurrence of a leak of credit information or a similar event, it can take immediate and necessary actions to mitigate the damage and promptly report the situation to the PBC and one of its branches at or above the level of central sub-branch of the capital city of a province or autonomous region.

Article 39 With respect to the credit reporting services and related activities provided or conducted within the mainland of the People’s Republic of China by a credit reporting agency, the enterprise and consumer credit information so collected shall be stored within the mainland of the People’s Republic of China.

Article 40 A credit reporting agency shall comply with applicable laws and regulations when providing consumer credit information to overseas parties.

Any credit reporting agency that offers enterprise-credit-information query products and services to overseas information users shall conduct the necessary checks on the identity of  the information users and their purposes of use, so as to ensure that such information is used for cross-border trades, investment and financing, or other reasonable purposes and will not harm national security.

Article 41 Any credit reporting agency that collaborates with an overseas credit reporting agency shall file the collaboration agreement with the PBC after executing it and before commencing the collaboration program.

Chapter VI Supervision

Article 42 A credit reporting agency shall disclose the following information to the public and accept public supervision:

(1) the types of credit information collected;

(2) the basic format and contents of the credit report;

(3) the dispute handling process; and

(4) other items whose disclosure is deemed necessary by the PBC.

Article 43 A consumer credit reporting company shall conduct annual audits of the compliance of its consumer credit reporting services with the Personal Information Protection Law of the People Republic of China and the Regulation on the Administration of Credit Investigation Industry, and submit the compliance audit reports to the PBC in a timely manner.

Article 44 The PBC and its branches at or above the level of central sub-branch of the capital city of a province or autonomous region shall supervise and inspect the following   aspects of a credit reporting agency:

(1) its internal controls for credit reporting services, including the completeness, compliance, and viability of various rules and procedures;

(2) the state of compliance of its credit reporting services, covering the compliance of its collection of credit information, provision and use of credit information, handling of disputes and complaints, user management, and other relevant matters;

(3) the safety and security of its credit reporting system, covering IT rules, security management, and system development; and

(4) other aspects related to its credit reporting activities.

Article 45 The PBC and its branches at or above the level of central sub-branch of the capital city of a province or autonomous region shall inspect and penalize any information provider or information user that violates the provisions of the Regulation on the Administration of Credit Investigation Industry by harming the legitimate rights and interests of information subjects.

Chapter VII  Legal Liabilities

Article 46 Any businesses that violate Article 4 of this Measures by engaging in consumer credit reporting services without approval will be penalized by the PBC in accordance with Article 36 of the Regulation on the Administration of Credit Investigation Industry. Any businesses that engage in enterprise credit reporting services without approval will be penalized by the relevant PBC branches at or above the level of central sub-branch of the capital city of a province or autonomous region in accordance with Article 37 of the Regulation on the Administration of Credit Investigation Industry.

Where a financial institution violates Article 5 of this Measures by entering a business relationship with a market entity for credit reporting services even though the market entity is not legally qualified to provide such services, the PBC shall order the financial institution to make corrections and impose a fine of not more than RMB30,000 on the financial institution  and a fine of not more than RMB1,000 on the person-in-charge with direct responsibilities.

Article 47 A credit reporting agency that violates Article 8, Article 16, Article 20, Article 27, or Article 32 of this Measures will be penalized by the PBC or the relevant branches at or above the level of central sub-branch of the capital city of a province or autonomous region in accordance with Article 38 of the Regulation on the Administration of Credit Investigation Industry.

Article 48 A credit reporting agency that violates Article 14, Article 21, Article 31, Article 34, Article 39, or Article 42 of this Measures will be ordered to make corrections by the PBC or the relevant PBC branches at or above the level of central sub-branch of the capital city of a province or autonomous region, have its illegal gains confiscated, and be imposed a fine of not more than RMB30,000 on the credit reporting agency itself and a fine of not more than RMB1,000 on the person-in-charge with direct responsibilities. Where laws and administrative regulations provide otherwise, those provisions shall prevail.

Chapter VIII Ancillary Provisions

Article 49 This Measures applies mutatis mutandis to the submission and query of credit information at the Financial Credit Information Basic Database by institutions connected to the database and engaged in credit reporting services or lending activities.

Article 50 This Measures applies to institutions that substantively provide credit reporting services to external parties in the name of “credit information service,” “credit service,” “credit scoring,” “credit rating,” or “credit repair.”

Article 51 Institutions that substantively engage in credit reporting services but have not obtained license for consumer credit reporting services or completed filing for commercial credit reporting companies before the effectiveness of this Measures, shall achieve compliance within 18 months from the effectiveness of this Measures.

Article 52 The PBC reserves the right to interpret this Measures.

Article 53 This Measures takes effect on January 1, 2022.

(Order of the State Council of the People’s Republic of China No. 631)

The Regulation on the Administration of Credit Investigation Industry, as adopted at the 228th executive meeting of the State Council on December 26, 2012, is hereby issued, and shall come into force on March 15, 2013.

Premier Wen Jiabao

January 21, 2013

Chapter I General Provisions

Article 1 This Regulation is made to regulate credit investigation activities, protect the legal rights and interests of the parties concerned, guide and promote the healthy development of credit investigation industry and enhance the building of the social credit system.

Article 2 This Regulation applies to credit investigation and the relevant activities carried out inside China. For the purpose of this Regulation, the term“credit investigation” refers to activities of collecting, arranging, saving and processing the credit information of enterprises, public institutions and other organizations (hereinafter referred to as “enterprises”) as well as individuals, and providing it to information users. The collection, arrangement, saving, processing and provision of information by the Basic Financial Credit Information Database formed by the state shall be governed by Chapter V of this Regulation. This Regulation is not applicable when state organs, or organizations authorized bylaws or regulations with the function of administering public affairs, collect, arrange, save, process and publish information of enterprises and individuals for the purpose of performing duties under laws, administrative regulations and the State Council provisions.

Article 3 Those engaged in credit investigation and the relevant activities shall abide bylaws and regulations and keep good faith, and may not endanger state secrets or infringe upon trade secrets or personal privacy.

Article 4 The People’s Bank of China (hereinafter referred to as “the supervisory and administrative department of credit investigation under the State Council”) and its local offices shall supervise and administer credit investigation industry by law. The local people’s governments at or above the county level and the relevant departments under the State Council shall enhance the building of social credit systems in the local regions and the relevant industries, develop the credit investigation market and promote the development of credit investigation industry.

Chapter II Credit Investigation Institutions

Article 5 For the purpose of this Regulation, the term “credit investigation institution” refers to legally formed institutions mainly engaged in credit investigation.

Article 6 To form a credit investigation institution engaged in individual credit investigation, it is required to satisfy the following conditions in addition to those set forth by the Company Law of the People’s Republic of China for the formation of companies, and obtain the approval of the supervisory and administrative department of credit investigation under the State Council:

1. Its principal shareholders have a good credit standing and have no record of gross violations of laws or regulations in the last three years;

2. Its registered capital is not less than 50 million yuan;

3. It is equipped with facilities, devices, systems and measures which satisfy the requirements of the supervisory and administrative department of credit investigation under the State Council to ensure information security;

4. Persons to be its directors, supervisors and senior managers satisfy the eligibility requirements as set forth by Article 8 of this Regulation; and

5. Other prudential conditions as set forth by the supervisory and administrative department of credit investigation under the State Council.

Article 7 To apply for forming a credit investigation institution engaged in individual credit investigation, the applicant shall submit an application form and materials proving its satisfaction of conditions specified in Article 6 of this Regulation to the supervisory and administrative department of credit investigation under the State Council. The supervisory and administrative department of credit investigation under the State Council shall examine the application by law, and make a decision of approval or disapproval within 60 days after accepting the application. In the case of approval, it shall issue an individual credit investigation   business operation permit; in the case of disapproval, it shall give reasons in writing. A credit investigation institution formed to operate individual credit investigation business upon approval shall handle registration formalities at the company registration organ on the basis of the individual credit investigation business operation permit. No entity or individual may engage in individual credit investigation without the approval of the supervisory and administrative department of credit investigation under the State Council.

Article 8 The directors, supervisors and senior managers of a credit investigation institution engaged in individual credit investigation shall be familiar with laws and regulations governing credit investigation, have experience and management ability required for performing duties in credit investigation industry, have no record of gross violations of laws or regulations in the last three years, and have the qualification ratified by the supervisory and administrative department of credit investigation under the State Council.

Article 9 For the formation of branch offices, merger or split, change of registered capital, or change of shareholders whose investment accounts for 5% or more of the total capital or shareholders holding shares accounting for 5% or more of the total shares, a credit investigation institution engaged in individual credit investigation shall obtain the approval of the supervisory and administrative department of credit investigation under the State Council. For the change of name, a credit investigation institution engaged in individual credit investigation shall file it with the supervisory and administrative department of credit investigation under the State Council.

Article 10 To form a credit investigation institution engaged in enterprise credit investigation, it is required to satisfy conditions set forth by the Company Law of the People’s Republic of China, and, on the basis of the following materials, handle filing formalities at the local office of the supervisory and administrative department of credit investigation under the State Council within 30 days after its registration is approved by the company registration organ:

1. its business license;

2. an explanation on its equity structure or organizational setup;

3. basic information about its scope of business, business rules and business systems; and

4. information security and risk prevention measures. For any change in matters to be filed, it is required to handle modification formalities at the original filing organ within 30 days as of the day of change.

Article 11 Credit investigation institutions shall report their credit investigation business operations of the last year according to the requirements of the supervisory and administrative department of credit investigation under the State Council. The supervisory and administrative department of credit investigation under the State Council shall announce the lists of credit investigation institutions engaged in individual credit investigation and those engaged in enterprise credit investigation to the general public, and update such lists betimes.

Article 12 When a credit investigation institution is dissolved or lawfully declared bankrupt, it is required to report to the supervisory and administrative department of credit investigation under the State Council, and dispose of its information database in the following way:

1. transferring the database to another credit investigation institution if it has reached an agreement thereon with the said credit investigation institution and obtained the approval of the supervisory and administrative department of credit investigation under the State Council;

2. transferring the database to a credit investigation institution designated by the supervisory and administrative department of credit investigation under the State Council when it fails to transfer the database in the way described in the preceding paragraph; or

3. destroying the database under the supervision of the supervisory and administrative department of credit investigation under the State Council when it fails to  transfer the database in the way described in either of the preceding paragraphs. When a credit investigation institution engaged in individual credit investigation is dissolved or lawfully declared bankrupt, it shall make an announcement at a medium designated by the supervisory and administrative department of credit investigation under the State Council, and surrender its individual credit investigation business operation permit to the supervisory and administrative department of credit investigation under the State Council for cancellation.

Chapter III Credit Investigation Rules

Article 13 To collect personal information, it is required to obtain the consent of the subject of the information. Otherwise, it may not be collected, unless for information which should be disclosed under laws or administrative regulations. Information about the performance of duties by directors, supervisors or senior managers of enterprises is not categorized as individual information.

Article 14 Credit investigation institutions are prohibited to collect information about the religious belief, gene, fingerprints, bloodtype, disease or medical history of individuals, as well as other individual information the collection of which is prohibited bylaws or administrative regulations. Credit investigation institutions may not collect information about the income, deposit, negotiable securities, commercial insurance, real property or taxes of individuals, unless they have expressly informed the individuals concerned of the possible adverse consequences that may be brought along with the provision of such information and have obtained their written consent.

Article 15 Before providing bad information about an individual to a credit investigation institution, the provider shall inform the said individual, unless for bad information that should be disclosed under laws or administrative regulations.

Article 16 Credit investigation institutions shall keep the bad information of individuals for five years from the daywhen the bad behavior or event stops. Upon   the expiration of five years, such information shall be deleted. During the period of retention of bad information, the subject of the bad information may make an explanation on the bad information, and the credit investigation institutionshall put it on record.

Article 17 Information subjects may inquire of credit investigation institutions about their information. Individual subjects have the right to have access to their own credit reports twice every year without paying fees.

Article 18 To inquire of credit investigation institutions about personal information, it is required to obtain the written consent of the information subject and reach an agreement with the subject on the use of such information, except for information which can be inquired about without consent as prescribed bylaws. Credit   investigation institutions may not provide personal information in violation of the preceding paragraph.

Article 19 A credit investigation institution, information provider or information user shall, when using a format contract to obtain the consent of the individual information subject, give prompts conspicuous enough to catch the attention of the individual and make explicit explanations as required by the individual.

Article 20 Information users shall use the personal information according to the stipulations in the agreement with the individual information subjects, and may not use it for other purposes or provide it to third parties without the consent of individual information subjects.

Article 21 Credit investigation institutions may collect enterprise information from sources such as information provided by information subjects, counterparties of enterprises and industry associations, information lawfully disclosed by the relevant governmental departments and judgments or decisions announced by people’s courts. Credit investigation institutions may not collect enterprise information the collection of which is prohibited bylaws or administrative regulations.

Article 22 Credit investigation institutions shall, according to the provisions of the supervisory and administrative department of credit investigation under the State Council, establish, improve and strictly implement information security rules, and take effective technical measures to guarantee information security. Credit investigation institutions engaged in individual credit investigation shall explicitly specify their staff members’ privileges and procedures to inquire about personal information, and register the inquiries made by their staff members about personal information by truthfully recording the name of staff members making inquiries, the time of inquiry, and the content and use of information. Staff members may not inquire about information in violation of the prescribed privileges or procedures or divulge information which they have access to in work.

Article 23 Credit investigation institutions shall take reasonable measures to ensure the accuracy of information provided by them. Information provided by credit investigation institutions may be used by information users as reference.

Article 24 For information collected inside China, credit investigation institutions shall arrange, save and process it inside China. To provide information to overseas organizations or individuals, credit investigation institutions shall abide bylaws, administrative regulations and the relevant provisions of the supervisory and administrative department of credit investigation under the State Council.

Chapter IV Demurs and Complaints

Article 25 An information subject holding that there is any error or omission in the information collected, saved or provided by a credit investigation institution has the right to raise a demur to the credit investigation institution or information provider, requesting for a correction. After receiving such a demur, the credit  investigation institution or information provider shall label the information concerned as demurred at according to the provisions of the supervisory and administrative department of credit investigation under the State Council, check and handle it within 20 days as of the day when the demur is received, and give a written reply to the demurrer. If it is found out upon check that there is an error or omission, the information provider or credit investigation institution shall correct it; if it has been confirmed that there is no error or omission, the label shall be removed; if it is unable to decide whether there is an error or omission upon check, the checking process and the demur shall be put on record.

Article 26 Information subjects holding that any credit investigation institutions, information providers or information users have infringed upon their legal rights    and interests may lodge complaints to the local offices of the supervisory and administrative department of credit investigation under the State Council. The local offices of the supervisory and administrative department of credit investigation under the State Council shall check and handle in a timely manner, and give written replies to complainants within 30 days as of the date of acceptance. Information subjects holding that any credit investigation institutions, information providers or information users have infringed upon their legal rights and interests may directly bring charges to people’s courts.

Chapter V Basic Financial Credit Information Database

Article 27 The state shall establish a Basic Financial Credit Information Database to provide information services for preventing financial risks and enhancing the development of the financial sector. The Basic Financial Credit Information Database shall be built, run and maintained by a specialized non-for-profit institution subject to the supervision and administration of the supervisory and administrative department of credit investigation under the State Council.

Article 28 The Basic Financial Credit Information Database receives credit information provided by institutions engaged in credit business according to the relevant provisions. The Basic Financial Credit Information Database provides inquiry services for information subjects and information users that have obtained the written consents of information subjects. State organs may inquire about information at the Basic Financial Credit Information Database by law.

Article 29 Institutions engaged in credit business shall provide credit information to the Basic Financial Credit Information Database according to the relevant provisions. Before providing credit information to the Basic Financial Credit Information Database or other subjects, institutions engaged in credit business shall obtain the written consent of information subjects and be governed by this Regulation as information providers.

Article 30 The specific measures for financial institutions not engaged in credit business to provide credit information to or inquire about credit information from the Basic Financial Credit Information Database and for the database to accept credit information provided by such financial institutions shall be made by the     supervisory and administrative department of credit investigation under the State Council together with the relevant financial supervisory and administrative department under the State Council.

Article 31 The institution operating the Basic Financial Credit Information Database may collect inquiry service charges on the cost compensation principle. The charging rates shall be determined by the price administrative department under the State Council.

Article 32 Articles 14, 16, 17, 18, 22, 23, 24, 25 and 26 of this Regulation apply to the institution operating the Basic Financial Credit Information Database.

Chapter VI Supervision and Administration

Article 33 The supervisory and administrative department of credit investigation under the State Council and the local offices thereof shall, according to laws,    administrative regulations and the State Council provisions, perform supervisory and administrative duties on the credit investigation industry and the institution operating the Basic Financial Credit Information Database, and may take the following supervision and inspection measures:

1. entering credit investigation institutions and the institution operating the Basic Financial Credit Information Database to make on-site inspections, and checking whether institutions providing information to or acquiring information from the Basic Financial Credit Information Database have observed this Regulation;

2. interviewing the parties concerned or entities and individuals relating to the event under investigation and asking them to make explanations on matters relating to the event under investigation;

3. consulting and copying documents or materials relating to the event under investigation, and sealing up materials likely to be transferred, destroyed, concealed or altered; and

4. checking the relevant information systems. The number of on-site inspectors or investigators shall not be less than two, and they shall produce their lawful credentials and the inspection or investigation notice. Entities and individuals under inspection or investigation shall be cooperative and truthfully provide the  relevant documents or materials, and may not withhold information or refuse or obstruct the inspection or investigation.

Article 34 Where a major information divulgence occurs to a credit investigation institution engaged in individual credit investigation, the Basic Financial Credit     Information Database or an institution providing information to or acquiring information from the Basic Financial Credit Information Database, the supervisory and administrative department of credit investigation under the State Council may temporarily take over the relevant information system or take other necessary measures to prevent the increase of damage.

Article 35 The staff members of the supervisory and administrative department of credit investigation under the State Council and the local offices thereof shall keep confidential state secrets and information subjects’information which they have access to in the course of performing duties.

Chapter VII Legal Liability

Article 36 Where any entity or individual forms a credit investigation institution engaged in individual credit investigation or engages in individual credit investigation without the approval of the supervisory and administrative department of credit investigation under the State Council, the supervisory and administrative department of credit investigation under the State Council shall close it down and impose a fine of not more than 500,000 yuan but not less than 50,000 yuan. If any crime is constituted, the liable party shall assume criminal liability.

Article 37 Where any credit investigation institution engaged in individual credit investigation violates Article 9 of this Regulation, the supervisory and administrative department of credit investigation under the State Council shall order it to correct within a certain time limit, impose a fine of not more than 200,000 yuan but not less than 20,000 yuan upon the institution and, for the directly responsible person in charge and other directly liable persons, give a warning and impose a fine of not more than 10,000 yuan. Where any credit investigation institution engaged in enterprise credit investigation fails to handle filing formalities under Article 10 of this Regulation, the local office of the supervisory and administrative department of credit investigation under the State Council shall order it to correct within a certain time limit and, if it fails to correct within the prescribed time, punish it according to the preceding paragraph.

Article 38 Where any credit investigation institution or the institution operating the Basic Financial Credit Information Database, in violation of this Regulation, has any of the following conduct, the supervisory and administrative department of credit investigation under the State Council or the local office thereof shall order it to correct within a certain time limit, impose a fine of not more than 500,000 yuan but not less than 50,000 yuan upon the institution and a fine of not more than 100,000 yuan but not less than 10,000 yuan upon the directly responsible person in charge and other directly liable persons, and confiscate the illegal gains if any. If any losses are caused to information subjects, the liable party shall assume civil liability; if any crime is constituted, the liable party shall assume criminal liability:

1. stealing information or otherwise illegally acquiring information;

2. collecting individual information whose collection is prohibited or without the consent of information subjects;

3. illegally providing or selling information;

4. divulging information due to negligence;

5. failing to delete bad information of individuals upon the expiration of the prescribed retention period;

6. failing to check and handle information at which demurs have been raised as required;

7. refusing or impeding the inspection or investigation activities of the supervisory and administrative department of credit investigation under the State Council or the local office thereof, or failing to truthfully provide the relevant documents or materials; or

8. any other conduct that violates the credit investigation rules or infringes upon the legal rights and interests of information subjects. Where any credit investigation institution engaged in individual credit investigation has any of the above-mentioned conduct, and if the circumstances or consequences are serious, the supervisory and administrative department of credit investigation under the State Council shall revoke its individual credit investigation business operation permit.

Article 39 Where any credit investigation institution, in violation of this Regulation, fails to report its credit investigation business operations of the last year as required, the supervisory and administrative department of credit investigation under the State Council or the local office thereof shall order it to correct within a certain time limit; if the institution fails to correct within the prescribed time, it shall impose a fine of not more than 100,000 yuan but not less than 20,000 yuan upon the institution and, for the directly responsible person in charge and other directly liable persons, give a warning and impose a fine of not more than 10,000 yuan.

Article 40 Where any institution providing information to or acquiring information from the Basic Financial Credit Information Database, in violation of this Regulation, has any of the following conduct, the supervisory and administrative department of credit investigation under the State Council or the local office thereof shall order it to correct within a certain time limit, impose a fine of not more than 500,000 yuan but not less than 50,000 yuan upon the institution and a fine of not more than 100,000 yuan but not less than 10,000 yuan upon the directly responsible person in charge and other directly liable persons, and confiscate the illegal gains if any. If any losses are caused to information subjects, the liable party shall assume civil liability; if any crime is constituted, the liable party shall  assume criminal liability:

1. illegally providing or selling information;

2. divulging information due to negligence;

3. inquiring about personal information or the credit information of enterprises without consent;

4. failing to handle demurs as required or correct information with errors or omissions; or

5. refusing or impeding the inspection or investigation activities of the supervisory and administrative department of credit investigation under the State Council or the local office thereof, or failing to truthfully provide the relevant documents or materials;

Article 41 Where any information provider, in violation of this Regulation, provides any credit investigation institution or the Basic Financial Credit Information Database with any individual’s bad information which is not information that should be disclosed according to law without notifying the individual beforehand, and if the circumstances or consequences are serious, the supervisory and administrative department of credit investigation under the State Council or the local office thereof shall impose a fine of not more than 200,000 yuan but not less than 20,000 yuan if the provider is an entity or a fine of not more than 50,000 yuan but not less than 10,000 yuan if the provider is an individual.

Article 42 Where any information user, in violation of this Regulation, uses personal information for purposes not agreed upon with the information subject or provides individual information to any third party without the consent of the information subject, and if the circumstances or consequences are serious, the supervisory and administrative department of credit investigation under the State Council or the local office thereof shall impose a fine of not more than 200,000 yuan but not less than 20,000 yuan if the user is an entity or a fine of not more than 50,000 yuan but not less than 10,000 yuan if the user is an individual; and confiscate the illegal gains if any. If any losses are caused to information subjects, the user shall assume civil liability; if any crime is constituted, the user shall assume criminal liability.

Article 43 Where any staff member of the supervisory and administrative department of credit investigation under the State Council or its local offices abuses powers, neglects duties, engages in malpractice for personal gains, fails to perform supervisory and administrative duties, or divulges state secrets or information of information subjects, sanctions shall be imposed by law. If any losses are caused to information subjects, he/she shall assume civil liability; if any crime is constituted, he/she shall assume criminal liability.

Chapter VIII Supplementary Provisions

Article 44 The meaning of terms mentioned in this Regulation is as follows:

1. Information providers refer to entities and individuals providing information to credit investigation institutions and entities providing information to the Basic Financial Credit Information Database.

2. Information users refer to entities and individuals acquiring information from credit investigation institutions and the Basic Financial Credit Information Database.

3. Bad information refers to information which exerts adverse impact on the credit standing of information subjects, such as: information about information subjects’failure to perform contracts in loaning, credit purchasing, guarantee, lease, insurance and credit card use activities; information about administrative punishments on information subjects; information about the judgments or rulings of people’s courts deciding that information subjects shall perform obligations or be subject to enforcement measures; and other bad information as specified by the supervisory and administrative department of credit investigation under the State Council.

Article 45 The conditions for the formation of foreign-funded credit investigation institutions shall be made by the supervisory and administrative department of credit investigation under the State Council together with other relevant departments under the State Council, and be subject to the approval of the State Council. Overseas credit investigation institutions shall obtain the approval of the supervisory and administrative department of credit investigation under the State Council before engaging in credit investigation inside China.

Article 46 Institutions which have already been engaged in individual credit investigation before the implementation of this Regulation shall apply for individual credit investigation business operation permits according to this Regulation within six months as of the date of implementation of this Regulation. Institutions which have already been engaged in enterprise credit investigation before the implementation of this Regulation shall handle filing formalities according to this Regulation within three months as of the date of implementation of this Regulation.

Article 47 This Regulation shall come into force on March 15, 2013.

Xinhai Liu; Ruowen Xu

Abstract：

At the beginning of 2015, Sesame score was born out of the finance department of the Alibaba Group, now named Ant Finance. Sesame score was introduced to Chinese consumers as the first public credit score in China and was soon brought into widespread use. Sesame score examines consumers’ creditworthiness based on one’s personal characteristics, credit history, contract performance, and social network and behavioural preferences, by incorporating proprietary big data that goes beyond mere financial aspects.

During recent years, the construction of a social credit score in China has caught the attention of the media across the globe. However, it is rather confusing to distinguish between the three main types of consumer scores: Sesame score, Social credit score, and FICO-like credit score. In this paper, we will explore the differences between these three types of consumer scores.

Delving into the mechanism of Sesame score, this research will explore in detail how it operates and analyses how it differs from a traditional credit score. In addition, we will investigate the applications and performance of Sesame score, as the score is widely used by digital vendors to provide and tailor daily services to consumers, enabling ‘use first and pay later’ or ‘borrow items without deposit’ features. Sesame score has accelerated the boom of the sharing economy in China.

Moreover, Sesame score has been recognized as a tool for risk controlling i.e. the safeguarding of Internet finance, given that the national credit bureau (Credit Reference Center) is not open to non-regulated Internet finance platforms whose credit applicants usually lack of credit history. Meanwhile, various Internet finance platforms and digital vendors have found Sesame score useful. It is worthwhile to look at how Sesame score meets the Chinese risk appetite and how the market has come to recognize the reliability of such a score. This paper also evaluates Sesame score approach to risk controls.

The wide application of Sesame score in non-loan fields has caused controversy, related to issues of consumer privacy and use in marketing. This year, due to the regulation from the People’s Bank of China, Ant Finance announced that it had stopped its business activities regarding the application of Sesame score in the finance field; now one must ask: what is the next step for Sesame credit score? This paper discusses the future of Sesame score with special consideration being given to the concepts ‘all data is credit data’ and ‘all service is becoming credit service’.

Key words: Sesame score, Credit score, Social credit score, Internet finance

Note: The report was original published in Credit Scoring and Credit Control Conference XVI,2019-08-29, Edinburg,U,K

For the full version of this report, please send the E-mail to public@pccm.org.cn

Xinhai Liu

Abstract

Consumer credit reporting^[1]is an important infrastructure for consumer finance and digital economy. As a product of the market economy, it is self-evident how important the credit reporting system is for the healthy growth of an economy and the stable operation of a financial market.

China’s consumer credit reporting did not start until the beginning of the century which was relatively late. However, as China emerges to be the world’s second largest economy, its domestic consumer finance became increasingly popular, and its credit market expanded. Consequently its consumer credit reporting agencies gradually attracted increasing attention. The central bank’s consumer credit reporting is efficient and highly capable of collecting data, however it mainly focuses on providing basic services. To provide services to the internet finance^[2]sector, private credit reporting agencies, such as the Sesame Credit, ran their own trials to ‘test the water’. Such trials caused a lot of controversy whilst agitating the market. In addition, Baihang Credit, established at the beginning of 2018 by eight private credit reporting agencies as well as The National Internet Finance Association of China (NIFA), under the supervision and guidance of the Chinese central bank, being the People’s Bank of China (PBoC), have received attentions from all circles of society. 

The development of China’s credit reporting is different from that of developed European countries and the US, as in China it grew with the rise of the digital economy, consequently the involvement of many big data companies and internet companies drove the development with data and technology. The development of Chinese consumer credit reporting is also closely associated with the construction of a social credit system with Chinese characteristics. Meanwhile, China’s consumer credit reporting faces challenges, as the regulations on protecting personal information tightens globally, the development of a credit reporting market is influenced. This paper believes that the future development of China’s consumer credit reporting depends on the strength of market forces, after carefully examine the current complex and changing status of the Chinese consumer credit reporting, based on the circumstances.

Key words：Consumer Credit Reporting，Credit Score,  PBoC,  Sesame Credit, Baihang Credit 

Note： The original Chinese report  was  published in China Reform, 2019 (5), pp. 60-66.（http://cnreform.caixin.com/2019-09-10/101460687.html）

For the full report, please send the E-mail to public@pccm.org.cn.

Author Bio：

Dr. Xinhai Liu is the  Deputy Director-General at the Professional Committee of Credit Management (PCCM), China Mergers & Acquisitions Association (CMAA). He is also a part-time researcher at the Center of Finance Intelligence Research, Peking University. 

Dr. Xinhai Liu is heavily involved in the R&D of Fintech, his focus covers policy, industry front and application algorithm. His book Credit Information Service and Big Data was published by the CITIC Press, a renowned publishing house in China. Dr. Liu is currently working on financial network analysis, alternative data based credit scoring, the application of AI and big data in finance. Meanwhile Dr. Liu owns several patents with his team on Fintech and AI.

Dr. Xinhai Liu obtained his PhD from the Katholieke Universiteit Leuven (K.U. Leuven) in 2011. After working in Belgium, Dr. Xinhai Liu worked in the Credit Reference Center at the People’s Bank of China as an associate researcher on credit risk management, where he conducted financial researches. He was a visiting scholar to the London School of Economics and Political Science (LSE).

Dr. Xinhai Liu has published academic papers in the world-level journals such as IEEE TKDE and IEEE PAMI and hosted several national research fundings on finance data analysis. 

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^[1]The international term for personal credit system is consumer credit system, however in China it is called personal credit system, therefore in the Chinese text personal credit system is used.  

[2]Internet finance is a new type of financial business model with which traditional financial institutions and internet companies conduct financing, payment, investment, and information intermediary services usingthe internet and information & communication technology.The term is quite popular in China in recent years, a typical product is P2P online lending. However, it has been replaced by a new word FinTech. (Xie, P., Zou, C. and Liu, H.(2020) Internet Finance in China: Introduction and Practical Approaches, Routledge)