Shanghai. China's state council has amended the process for how companies disclose credit information via the Provisional Rules on Enterprise Information Disclosure act which took effect on October 1 this year. The new disclosure rules require all companies, foreign and domestic in the PRC to submit annual credit reports for public disclosure via the publicly available Enterprise Credit and Information Disclosure System which can be accessed on a real-time basis.
Companies are now required to submit annual reports which replace the former annual inspections. The annual reports which has to be submitted in Chinese, has to include liquidity status, equity investments, subscribed capital, among other things. Declaration of formerly required information such as work force, total assets and liabilities, operating revenue and profits is no longer mandatory under the new law, whereas in the past, companies where required to submit audited financial statements during the annual inspection. The companies themselves are responsible to submit the reports. Failure to submit these reports could lead to being put on a blacklist, which could severely restrict future business activities.
The Provisional Rules on Enterprise Information Disclosure is part of a bigger overhaul of the Company Law, which started last year when China's State Council issued the Plan on the Reform of the Registered Capital Registration System, where some of the major changes included elimination of minimum required capital requirements (with some exceptions) and other amendments aimed at liberalized capital contribution scheduling requirements. The overall goal with this latest legislation is to increase transparency and simplify public access to credit information.
- This is good news for anyone evaluating suppliers and potential business partners in China, says Per Linden, CEO of the consulting firm Scandic Sourcing, located in Shanghai, who is regularly identifying suitable suppliers for Western firms looking to outsource production to China. "One year ago, credit disclosure companies stopped getting access to tax reports, which made it difficult to make credit checks of Chinese companies. To get accurate info, we had to ask the companies themselves to disclose their annual audit reports, which they may or may not do. Now, the publicly available Credit and Information Disclosure System circumvents all that, and I think this is a big step towards simplifying credit checks in China.