Chinese language - China speeds up credit rating

BIZCHINA / Top Biz News

China speeds up credit rating
(Xinhua)
Updated: 2006-06-06 09:21

The 2006 credit rating campaign targeting China's foreign trade companies
formally started on Monday, according to the Ministry of Commerce.

Initiated by the China Shippers Association which is under the ministry's
jurisdiction, the event aims to stem business fraud and set up a sound
credit system in the foreign trade sector, said the circular.

Due to lack of a credit system, the proportion of bad debts to
retrievable debts of some Chinese foreign trade companies is as much as
30 percent, far higher than the average 0.25 to 0.5 percent of their
western peers, said Chen Xinnian, director of the Consumption Research
Office of the Economy Institute of the National Development and Reform
Commission.

Calling credit rating an "urgent task", Chen said that only after a
nationwide credit system consistent with international practices was
established could domestic companies slash their transaction costs and
trade risks.

The circular said that domestic companies engaged in the import and
export business should submit their credit records by December 31 to the
Beijing International Business and Credit Assessment Company (IBD-Credit)
for preliminary evaluation.

The IBD-Credit, with authorization from the ministry, will make
quantitative analysis on the financial health of a company including its
assets scale and quality, profitability, solvency, cash flow, operation
efficiency and growing potential.

An expert panel affiliated to the China Shippers Association will then
review the preliminary rating results and base their final judgement on a
comprehensive evaluation of the records from departments like the
customs, taxation, industry and commerce, quality and quarantine and
banks.

Since the first such campaign was started in 2004, nearly 1,000 companies
have had their credit status rated. The rating is valid for five years
and requires an annual review, said the circular.

(For more biz stories, please visit Industry Updates)

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