Foreign borrowers’ financial information will be recorded in China’s national credit system, and the central bank is studying the feasibility of a cross-border information sharing mechanism to improve services for foreigners and prevent credit risks.
Foreigners wishing to borrow money from financial institutions on the Chinese mainland should register their nationality on personal credit reports, a new requirement of the People’s Bank of China, the central bank, in order to better monitor domestic credit market information, said Wang Xiaolei, deputy head of the PBOC Credit Reference Center on April 22.
The move also targets improved information recording of foreigners’ credit activities in China and aims to help them receive better financing services, according to officials.
The central bank will notify foreigners before collecting the additional information, she said. Chinese financial institutions need to know about foreign borrowers’ previous credit records, including such activities in other countries, and to rate their credit history before issuing loans.
That is a part of the national credit system’s upgrading work, which has already started and is still in the process. “The launch time of the new version has not yet been decided,” said Wang.
Analysts said the issue is related to cross-border information transferring and sharing. Authorities in different countries are always wary of protecting their citizens’ information security.
“The central bank and its Credit Information System Bureau are actively studying the mechanism,” Wang added.
Li Bin, deputy head of the bureau, said on April 22 that the central bank is in touch with financial officials in the Guangdong-Hong Kong-Macao Greater Bay Area to accelerate cooperation on credit information management with Hong Kong and Macao regulators.
An extension of the Bay Area credit regulatory framework is being considered that would cover corporate and individual credit information. “On the following steps, we will ask for financial institution opinions and the building of connections among credit information service institutions in the area,” Li told China Daily.
The PBOC released a statement on its website on April 22 indicating that more credit information will be included into the system in order to accurately assess credit risks and minimize defaults. The information will cover payment history of utility bills, loans jointly borrowed by more than one person, and guarantee arrangements between individuals and corporations.
The PBOC’s updated credit information system will help improve accuracy of information used by banks in their credit decision-making processes, Nicholas Zhu, a vice-president and senior banking analyst at Moody’s, told China Daily.
Efforts to expand data collection to utility bill payment histories will also help improve the comprehensiveness of data.
The national credit information database was launched in 2006, and is managed by the PBOC. It now covers information of 259.18 million enterprises and 990 million individuals, according to the central bank.
To establish a credit system covering all of society, the central bank has issued a license to Baihang Credit, China’s only licensed market-based personal credit agency.
Baihang will focus on rating consumer credit information recorded by non-bank finance providers, such as online peer-to-peer lending platforms.
Credit information from more financial institutions will be included into the Baihang database in the future, and the credit service market potential is still very huge, said Li from the central bank.
Baihang uses big-data digital technology to process activities such as mobile phone usage, travel, locational data and purchasing history. The complementary value of the non-bank behavioral data will allow lenders to make more informed loan decisions for consumers that lack a credit history, such as the 171.9 million migrant workers in China, according to research from Moody’s.