China Railway Construction Corp deployed thousands of workers over four years to build part of a coal-carrying line from Inner Mongolia to Jiangxi province — about the same distance as midtown Manhattan to Walt Disney World Resort in Florida.
The project cost about 200 billion yuan ($28 billion) in total and was heralded by state media in 2018 as an exemplar of “safe production” with no injuries or deaths. Except there were, and China Railway’s project managers were covering them up.
Tipsters exposed the conspiracy to local reporters, and a state-run China Railway unit eventually admitted that three workers died in 2017 when a panel they were standing on fell into the Ganjiang River. The managers were punished and so was the subsidiary: It was blacklisted for a year by the government and subject to more inspections, limits on bidding for public projects and restrictions on issuing bonds and shares.
That black mark was fed into China’s corporate social-credit system, a public repository of good and bad behaviour by every company in the world’s second-biggest economy. In an environment where a tweet, map or even T-shirt slogan can cause a world of pain, businesses are eager to stay below the government’s radar. The assemblage of an all-encompassing compliance monitor in cyberspace only compounds their anxiety.
“It’s a typical credit rating but sort of on steroids,” said Andrew Polk, co-founder of Beijing-based Trivium China, which consults with companies on social credit. “The system will be widely used in China to oversee domestic and foreign companies, and firms have to assign resources to keep a real eye on making sure their records are clean.”
The corporate system is developing side by side with one accumulating data on China’s 1 billion-plus citizens that’s triggering fears of increasing state control. It aggregates records from different agencies showing whether a business has followed or violated hundreds of rules.
Corporate actions are categorised and recorded, with better performance potentially leading to lower taxes, more favourable loan terms and more opportunities to bid for public projects. Rewarded deeds include paying taxes on time, meeting emissions standards, making charitable donations and having good safety records.
Centralising this information enables government officials, banks and consumers in one region to check a company’s behaviour in another.