
The Social Credit System currently being rolled out in China may pose significant organisational and legal challenges for both foreign and Polish entities operating in China.
Polish enterprises should pay special attention to verifying their business partners in China, not only in examining the quality of goods they produce and their operational compliance with law, but also verifying their Social Credit System rating.
The ongoing implementation of the System gives Polish businesses time to adapt to the new requirements. Companies should review their current performance, identify risks and detect negative records before sanctions are implemented. They can also adjust their internal processes and structures to the requirements of corporate SCS to ensure they receive a positive rating in the future. However, this opportunity window is closing fast.
How does the Chinese Social Credit System work?
The Social Credit System is an initiative currently being implemented in China to monitor and assess citizens’ behaviour in terms of compliance with law and the principles of social coexistence. The system is based on databases which include information from all kinds of state registers, courts, public administration bodies, traffic cams and mobile apps. It is designed to build a high-trust society where individuals and organisations follow law and closely adhere to the non-legal principles of social conduct.
This is achieved by assigning social credit scores to citizens based on their behaviour, directly translating into a variety of rewards and punishments. High scores give access to all kinds of public benefits, while low scores result in loss of social credit and, in consequence, hindered access to such benefits, housing or credit markets, and may even lead to restrictions on travel, including on leaving China. The Social Credit System, which is being developed and refined, in addition to monitoring and assessing citizens’ behaviour, also comprehensively covers business activity.
Participation in the system is mandatory for all businesses registered in China, both domestic and foreign, which are constantly monitored for compliance with law and the non-legal principles of social coexistence. It is crucial for businesses to understand the areas of compliance to avoid losing public trust and even being blacklisted.
Rating of businesses under the Social Credit System
The score depends on compliance with law, lack of tax arrears and implementation of government policies. The assessment also covers past projects, in particular those relating to the public sector, annual financial statements and reports, and business licenses, concern for the environment, compliance with employee rights, as well as online activity (primarily for e-commerce).
Low-scoring businesses that do not meet the requirements may be blacklisted, which could lead to restrictions on their current operations, including access to market capital, public procurement and public aid. Business partners of any such blacklisted company may also be affected, since maintaining business relations with a blacklisted company reduces the rating of its business partners.
At the present stage of implementation, the system is not yet unified, with individual public authorities keeping their own relevant business registers and ratings.
Pending full system consolidation and centralisation, “joint sanctions”, imposed simultaneously on a single entity by several public authorities for illegal actions in more than one area, have been introduced as a temporary enforcement mechanism. Such sanctions may extend to a number of business areas.
In practice, a low score for late payment of taxes can result not only in tax sanctions, but can also limit the company’s ability to obtain land use permits or rights.
The Social Credit System directly covers all businesses registered in China, both domestic and foreign, but may indirectly impact all enterprises doing business in China insofar as their business partners in China will be covered by the system.
Polish firms having their representative office, branch or daughter company in China will be directly covered by the system and must ensure that its activities comply with the system requirements, since the activity of that company will be assessed under the system, resulting in facilitated or restricted access to the Chinese market as discussed above.
Polish businesses importing goods without a permanent presence in China will be indirectly covered by the system, i.e. through their Chinese suppliers, meaning that the positive or negative rating of suppliers will also affect the Polish company’s subsequent rating (should it opt to establish a presence in China in the future).
Since the Social Credit System is still being developed, it is not yet clear what requirements it will impose on technology sector players, particularly with respect to the obligation to submit user data to state registers. This may be particularly difficult for IT, gaming and technology service providers that manage large amounts of sensitive data concerning their users, often including consumer behaviour.
Key issues to be considered
The Corporate Social Credit System will have a profound impact on the operation and development of companies doing business in China. Therefore, at this stage, it is important for companies to identify their obligations related to the System being introduced and prepare accordingly for its implementation. Below are some of the key steps:
1. Identifying the regulatory framework in the area/sector where the company operates
As the system is not yet uniform at the national level, regulations affecting the system rating of companies may differ depending on the province, city, or industry in which the company operates (e.g. expectations for the pharmaceutical industry may differ from those of the food industry). In addition to the regulatory framework, it is also important to understand the actual expectations of public authorities towards companies active in the area/sector for which the authorities are responsible;
2. Verifying business partners
It is crucial to identify the rating of Chinese business partners as 2 working with lower-rated companies lowers the rating of their business partners;
3. Carrying out an internal audit
Verifying information to be provided to the authorities for full compliance with the law. This means that companies need to ensure that their internal processes and structures enable the effective management of the System and prevent negative ratings and sanctions. At this stage, it is essential to understand what exactly the Social Credit System requires 3 of the company and assess the level of implementation of the relevant compliance procedures;
4. Implementing appropriate procedures
If the audit reveals that the company’s procedures are 4 insufficient, procedures should be put in place to ensure compliance with System requirements;
5. Implementing a corrective plan (optional)
If a company receives a low rating in the Social Credit System, it can implement a corrective plan to improve it. For example, in the tax system, companies may receive either a rating of A, B, M, C or D, with A being the highest score.
If a company receives a B rating, e.g. due to late payment of taxes (and consequently loses their eligibility for state aid), it may raise its rating by improving the timeliness of filing future financial statements or, in the case of errors in tax returns, by correcting financial statements in the future with the help of specialised tax offices. It takes 1-3 months to raise a company’s rating. However, if a company is blacklisted, it may take 2-5 years for it to be removed from the list.
Perspectives
Recently, several Chinese technology giants, including Huawei, Alibaba, Tencent, VisionVera and Taiji Computer Corporation, have also been involved in the work to create a single central database for the system.
Kochański & Partners China Desk
The dedicated China Desk team have extensive experience serving Chinese entities in the Polish market and Polish entities in China, in areas as diverse as energy, transport, pharmaceutics and new technologies. Our specialists are all dual graduates of both Asian and Polish Universities, well-versed in Chinese business etiquette. Understanding of Chinese business and legal culture allows our Chinese clients to trust us to support them at every stage of their entrepreneurial activity, offering solutions tailored to their business needs and expectations.
The team actively participates in all major China-related economic events, and can comprehensively, professionally and individually advise clients in all areas of doing business both in Poland and China.
China’s Social Credit System – how can we assist?
We assist our clients at every system implementation stage. Our experience and cooperation with renowned Chinese law firms allow us to provide advisory in the following areas:
- Company profile overviews
It is crucial for foreign-invested enterprises to have a thorough understanding of compliance requirements and the legal position of their Chinese subsidiary. Based on available ratings and blacklists, we provide a comprehensive review of the social rating of a company incorporated in China, including any potential compliance risks or irregularities.
- Company financial overviews
We specialise in reviewing accounting records and internal financial processes to identify potential risks and compliance issues that have a direct impact on a company’s credibility rating. This review allows greater transparency and enables continued compliance with regulations.
- Company rating improvements
Our team helps low-scoring or blacklisted companies rectify outstanding compliance issues, and supports them in applying to the relevant authorities to improve the rating
Jacek Kozikowski, PhD, LL.M. is responsible for the Firm’s relations with Chinese clients. Jacek advises on energy & infrastructure projects with a particular focus on greenfield investments, and energy, transport and pharmaceutical projects for Chinese businesses in Poland. Prior to joining Kochański & Partners, Jacek spent several years in Asia and was awarded his PhD degree in International Investment Law from Nagoya University, Japan.
Aleksandra Ryżkowska, LL.M., specialises in delivering business advisory to Chinese and Polish operators. She holds a Master of Law degree in Chinese Comparative Law from China University of Political Science and Law, Beijing. Prior to joining Kochański & Partners, Aleksandra worked at one of Poland’s largest law firms. During her 2-year stay in China, she also gained professional experience as an intern at the Embassy of the Republic of Poland in Beijing, where she was responsible for Polish-Chinese economic cooperation.
Patrycja Pendrakowska, President and Founder of the Boym Institute think tank, and PhD student at the Faculty of Philosophy, University of Warsaw. A sinology, sociology, philosophy and financial law graduate of the University of Warsaw, having also studied at LMU in Munich and FU in Berlin, completing her research internship at the Chinese Academy of Social Sciences, Beijing. Her scientific focus includes political, ideological, economic and legal transformation in the People’s Republic of China.

Patrycja Pendrakowska Founder and the vice president of the Boym Institute, and analyst of China's foreign policy and economy. On behalf of the Institute, she works on the EU-ASEAN relations within the EANGAGE project coordinated by KAS Singapore and on the Betzavta method with the Adam Institute for Peace and Democracy in Jerusalem. She is one of the founding members of the board at WICCI's India-EU Business council based in Mumbai and coordinated the Transcultural Research Group on the Belt and Road Initiative organised by the Leadership Excellence Institute Zeppelin. Ms Pendrakowska is a PhD candidate at the Humboldt University in Berlin, where she researches political philosophy in China. She graduated from the University of Warsaw with a BA in Sinology, Sociology and Philosophy, and holds two master's degrees in Financial Law, as well as Ethnography and Cultural Anthropology from the University of Warsaw.
czytaj więcej
Chinese work on the military use of artificial intelligence
Intensive modernization and the desire to catch up with the armed forces of the United States made chinese interest in the military application of futuristic technologies grow bigger.
Paweł BehrendtInterview with Uki Maroshek-Klarman on “Betzavta” method
Interview with Uki Maroshek-Klarman - Academic Director of the Adam Institute for Democracy and Peace in Israel. Founder of "Betzavta" method, which was created with intention of streghtening people's participation in society and making conflicts easier to solve.
Patrycja PendrakowskaPolish women do not often become the heroines of media reports in Central Asia. In February 2020, however, it was different. The story of Agnieszka Pikulicka-Wilczewska, a journalist, "heated up" the headlines of local news portals. More importantly, "between the lines" she talked a lot about contemporary Uzbekistan and the role of women in politics.
Magdalena Sobańska-CwalinaWomen’s liberation in China: interview with prof. Wu Lijuan
Interview of Ewelina Horoszkiewicz with prof. Wu Lijuan - Associate Professor at the Department of Sociology at Peking University. Her research concentrates on the gender issues and social changes brought about by globalization. She wrote a book “Job Placements and Job Shifts in China: The Effects of Education, Family Background and Gender”.
Ewelina HoroszkiewiczFrom quantity to quality. Demographic transition in China – interview with Prof. Lauren Johnston
What we observe in China is a population reduction strategy paired with the socio-economic transition. In my view it’s not a crisis, but it is a very challenging transition.
Lauren JohnstonTaiwanese Perceptions of Russia’s Ukraine war
Since the invasion of Ukraine, the Taiwanese government remained committed to its position of condemnation for Russia, humanitarian support for Ukraine, and deep appreciation and admiration for the Ukrainian people’s will to defy power, resist aggression, and defend their nation.
Kuan Ting ChenBook review: “North Korea’s Cities”
Book review of "North Korea’s Cities", written by Rainer Dormels and published byJimoondang Publishing Company in 2014.
Nicolas LeviBook review: “Korean Diaspora in Postwar Japan – Geopolitics, Identity and Nation-Building”
Book review of "Korean Diaspora in Postwar Japan - Geopolitics, Identity and Nation-Building", written by Kim Myung-ja and published by I.B Tauris in 2017.
Nicolas LeviWorkshop – Liberalism vs authoritarianism: political ideas in Singapore and China
We cordially invite you to a workshop session “Liberalism vs authoritarianism: political ideas in Singapore and China”. The workshop is organized by Patrycja Pendrakowska and Maria Kądzielska at the Department of Philosophy, University of Warsaw on ZOOM.
Online Course: “Conflict Resolution and Democracy”
The course will be taught via interactive workshops, employing the Adam Institute’s signature “Betzavta – the Adam Institute’s Facilitation Method“, taught by its creator, Dr. Uki Maroshek-Klarman. The award-winning “Betzavta” method is rooted in an empirical approach to civic education, interpersonal communication and conflict resolution.
Paweł Behrendt for 9DASHLINE: The South China Sea – from colonialism to the Cold War
We would like to inform, that 9DASHLINE has published article of Paweł Behrendt - the Boym Institute Analyst, in which he wrote about history of the South China Sea dispute over the 20th century.
Paweł BehrendtOnline Course: “Conflict Resolution and Democracy”
The course will be taught via interactive workshops, employing the Adam Institute’s signature “Betzavta – the Adam Institute’s Facilitation Method“, taught by its creator, Dr. Uki Maroshek-Klarman. The award-winning “Betzavta” method is rooted in an empirical approach to civic education, interpersonal communication and conflict resolution.
Will 2023 be the year of improving relations between Albania and South Korea?
In April 2021, the 30 years of establishing diplomatic relations between the Republic of Korea (ROK) and Albania was officially organized in the South Korean embassy in Athens, the capital of Greece. The localization of these official festivities perfectly pictured the nature of the relations between these two countries.
Nicolas LeviIn the first part of this analysis of Ulaanbaatar’s winning 2040 General Development Plan Conception (GDPC) I look into the historical preconditions for the city’s planned development as well as present the legislative climate in which works on Ulaanbaatar’s future development strategies have recently found themselves.
Paweł SzczapWe would like to inform, that Observer Research Foundation has published article of Patrycja Pendrakowska - the Boym Institute Analyst and President of the Board.
Patrycja PendrakowskaIndian Roundtable – Poland’s Challenges and Opportunities in the Subcontinent
In recent years, India has been the fastest growing among the major countries' economies in the world. (...) In the coming decades, the Subcontinent's largest country may remain one of the pillars of global economic growth. This is one of the reasons why the country is already the most popular destination for Polish foreign investment in the Asian-Pacific region.
Book review of "GDR International Development Policy Involvement. Doctrine and Strategies between Illusions and Reality 1960-1990, The example (South) Africa", written by Ulrich van der Heyden and published by Lit Verlag in 2013.
Nicolas Levi“May you be the mother of a thousand sons” – the status of women in Indian society
The 1950 Indian Constitution introduced the principle of equal opportunities for gender equality, which grants women and men the same rights in family life, political, social and economic life. So why is it that nearly forty per cent of girls aged 15-17 do not attend school, the custom of dowry giving is still cultivated and prenatal sex selection is still a huge social problem?
Magdalena RybczyńskaThe countries of the Indochinese Peninsula are struggling with the problem of the deteriorating state of the Mekong River, which scientists and publicists are increasingly boldly describing as an ecological disaster. Alongside climate change, existing hydropower plants and those under construction in China and Laos are among the greatest threats. These ventures deepen the regional dispute over a river crucial to communities of tens of millions of people.
Jakub KamińskiJoin us for the Adam Institute’s Latest Online Course
Conflict resolution models have been primarily crafted and codified by men. The Adam Institute for Democracy and Peace invites you to be part of that much-needed change through an experiential and innovative Online Course "Conflict Resolution in the Context of Gender".
On conflict in the Middle East: Malik Dahlan’s Letter to President Isaac Herzog
This letter has been included into our Voices From Asia series, as we consider it a significant addition to the ongoing discussion surrounding the ongoing conflict in the Middle East.
Malik DahlanBeyond Grey Hulls: Europe’s Role in “Crowdsourcing” Maritime Domain Awareness in the South China Sea
If developments observed in the South China Sea over the recent months are of any indication, it simply means that the situation has worsened. China’s continued aggression towards its neighbors – the Philippines and Vietnam in particular, has continued unabated.
Collin KohInternet, cryptocurrencies & blockchains in North Korea
North Korea is considered as a secretive state, but, paradoxically, the country is developing last trend technologies. With prohibitions restricting the flow of money, the country is turning to bitcoin and other cryptocurrencies to finance their programs, instead of coming under new pressure.
Nicolas LeviTSRG 2021: The Impacts of the BRI on Europe: The Case of Poland and Germany
It is important to contribute to the understanding of what the New Silk Road can mean in economic, political, leadership and cultural terms for the European countries involved. This analysis should reveal the practical consequences of the Belt and Road Initiative for Europe in the case of Poland and Germany, as well as their respective social effects.