Chen Qingtai, vice-minister of the Development Research Center of the State Council, said China is in much need of a system to reflect and supervise personal, company and governmental credibility.

At yesterday's discussion conference held in Beijing, Chen said that the lack of such a system has resulted in an epidemic of fraudulent activities, which in turn have caused varying degrees of disruption to the country's burgeoning market economy.

He cited examples of bad contract performance, counterfeit commodities, rights infringements, fraud and chain debts at the one-day meeting organized by China Chengxin Securities Rating Co LTD.

Chen urged good coordination work by governments at all levels in the system-building process.

Chen Hongjun, deputy general manager of the Chengxin company, said the lack of credit has become a "bottleneck" restricting economic development and threatening financial security. Without a sound social credit system, China would be barred from the world, he added.

Citing such cases as cheating, black-box dealings, counterfeiting, repudiating debts and evasion of tax, Chen said, "these evils cannot be tolerated in a market economy and constitute the biggest challenge and trouble China faces in the WTO big family."

For many years, the Chinese Government has been enjoying a good reputation in the international community. "If Chinese enterprises fail in 'integrity,' they would damage not only their own image, but also that of the country," said Chen, who is now heading a research project on credit system launched by the State Economic and Trade Commission.

According to official statistics, some 90 percent of business deals in Western countries are settled on the basis of integrity. But China's market economy was born out of planned economy and it has a weak foundation of credit. "After the accession to the WTO, the first thing China faces is exchanges with credit-based economies in international trade," he said.

The negative effect and losses due to creditability problems are huge in China. It is estimated that forged and shoddy goods cause an annual loss of 200 billion yuan (US$24 billion), and the amount of financial expense added due to debt chains and cash transactions tops 200 billion yuan (US$24 billion).

"Credit is the lifeblood of a market economy. To build China's credit system is of vital importance in guarding against financial risks," Chen added.

(China Daily September 19, 2002)