China To Require Foreigners To Submit Credit Info Before Taking Out Loans
China has announced that it will be adding a new feature to its national credit system involving foreign borrowers. The country's central bank, the People's Bank of China, will apparently now be requiring foreigners to submit their personal credit reports and register their nationality before they can borrow money from any financial institution.
In addition to the new requirement, China's central bank is also reportedly studying the application of cross-border credit information sharing.
The move has been explained to be a way to further improve financial services within the country and to prevent any unwanted financial risk for creditors. The bank's plan to add cross-border credit information sharing may not be as easy to implement, given that some countries are very protective of their citizen's information security.
According to the deputy head of the People's Bank of China, Wang Xiaolei, credit information submitted to the country's national credit system will be vital in monitoring the domestic credit market and to protect the country's financial institutions. This will, in turn, allow financial institutions to operate more efficiently and provide better financial service to everyone concerned.
China's national credit information database was originally launched in 2006. The database, which is managed by the People's Bank of China, has managed to collect information on around 259 million businesses and around 990 million individuals living in the country. The database uses a myriad of data acquired through different digital technologies. This includes financial activities such as mobile payments, travel, purchasing history, and outstanding loans.
Officials have argued that requiring credit information for foreigners is essential given that a good number of borrowers in the country don't have any form of credit history. This is particularly true for the more than 171 million migrant workers that are currently staying in China. Foreigners who wish to borrow money will reportedly first be notified by the central bank before it collects any information. The credit records that will be collected will include a person's financial activities in other countries. The data will then be used to issue a rating for the particular customer prior to releasing any type of loan.
The People's Bank of China stated that the new requirement is part of the national credit system's upgrading work. The upgrade is reportedly still in progress, with the new version likely to be launched very soon. Apart from the new requirement, the bank also recently announced that it will be including additional data to an individual's credit information in its system in the coming months. The data will include payment histories of utility bills, joint loans, and guarantee arrangements.