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At the Start of its fifth Decade of (re-)Development, where is China Heading?

At the Start of its fifth Decade of (re-)Development, where is China Heading?
January 2020

Increased controls through technology

Sticking to its top-down management concept, the government intends to influence all enterprises, not only the SOEs it directly controls but also the private ones. China’s answer to the paradox of wanting to control a private sector while leaving it its economic freedom, is the much talked about social credit system. The administration will compute a rating for each enterprise in China (state-owned, private and foreign) and, depending on the rating obtained, apply punishments or rewards which will take the form of easier access to government support, bank credits and less frequent government audit. Positive points could also be obtained by following policies promoted by the government, such as buying an electric rather than traditional vehicle. A rating system based on the same general principles will also be generalized to all individuals in China. Those blacklisted (there are 13 Mio of them today) are not permitted to take high-speed trains or buy flight tickets, among others. This is a completely new approach to government which we may find completely outlandish. It is again an illustration of China taking its own way and, if needed be, a confirmation that China is ready to innovate at government level too. But, if anything, foreign enterprises are generally more used to be compliant. So as a whole, we are convinced that the social credit system will actually force local companies to follow regulations as foreign one do. Eventually it will favor those who already believe in being fully compliant. cut full size

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