China is ratcheting up efforts to promote the classification management of enterprise credit risks, as part of a broader drive to make supervision fairer and more efficient and create a better business environment for all market entities, the country's top market regulator said on Tuesday.
China's market entities registered fast growth in recent years, with the total number exceeding 150 million so far, of which about 48 million are enterprises, said Pu Chun, deputy head of the State Administration for Market Regulation, while emphasizing continuously innovating the supervision method plays a vital role in establishing a modern market-oriented supervision system.
Pu said pushing forward the classification management of enterprise credit risks serves as a prerequisite for stimulating the vitality of market entities, an urgent need to optimize regulatory resources and an effective measure to enhance supervision efficiency.
Under the practice, the SAMR said enterprises will be divided into four categories-low credit risk, general credit risk, relatively high credit risk and high credit risk. In addition, cutting-edge technologies, such as big data, machine learning, and artificial intelligence will be utilized to gather and analyze the operational situation of enterprises.
"More efforts should be made to collect the credit risk information of enterprises in a comprehensive and timely manner, formulate a relatively unified credit risk classification standard across the nation, and set up a classification management system of enterprise credit risks," Pu said.
Luo Zhongwei, a researcher at the Institute of Industrial Economics under the Chinese Academy of Social Sciences, said implementing the classified credit risk management for enterprises is conducive to solving the information asymmetry between trading parties, reducing the risk and costs in transactions, and improving supervisory efficiency.
Luo said the classification management of enterprise credit risks, which mainly involves the relationship of the creditor's rights and debt obligation, and reflects the current credit risk of enterprises to a certain extent, could also ensure safety in transactions and regulate the behavior of market entities.
He added China owns a large number of market entities, with complicated operational situations and the scientific, dynamic and accurate supervision method will further improve the allocation of regulatory resources, save expenditure on supervision and maintain normal market order.
Liu Yan, head of the credit supervision department at the SAMR, said the ministry will continue to improve the enterprise credit risk classification index system, enhance the overall capacities to collect and use information, and achieve accurate and effective regulation.
The classification of enterprises' credit risks can help authorities identify risks and take targeted regulatory measures, especially for enterprises with low credit, and even give pre-warnings on illegal activities of enterprises, said Jiang Han, a senior researcher at market consultancy Pangoal.
China had 103 million registered individually-owned businesses by the end of last year, a record high under supportive policies to energize market entities, data from the SAMR showed.
Individually owned businesses accounted for about two-thirds of all market entities in China, and they employed 276 million people. Around 90 percent of these businesses are service providers, mainly engaged in retail, hospitality, catering and residential services.
Furthermore, more than 28.87 million market entities were newly established last year, marking a year-on-year increase of 15.4 percent, said the SAMR. In addition, China's improved business environment and super large market helped attract 61,000 new foreign-invested firms in 2021, up 23.3 percent year-on-year.
To restore sound market order and promote fair competition, China's market regulatory authorities have introduced a series of laws and regulations while cracking down on behaviors impeding fair competition in areas including the platform economy, healthcare and public services. The authorities have also formulated supportive measures to help small and medium-sized enterprises.
