A bipartisan group of two dozen influential Senators have expressed concern over the Chinese Corporate Social Credit System and urged the US Trade Representatives to prioritise research and analysis into it to ascertain the impact of such a system on American workers, companies, and investors.
In a letter to US Trade Representatives, Robert Lighthizer, the Senators worried that many of the criteria envisioned under the Corporate SCS could be used to coerce the onshoring of research and development by US companies within China's borders.
They are also worried that it would require technology transfer or otherwise make it easier for Chinese interests to steal American intellectual property, and coerce American corporate support to China's industrial and foreign policies.
Authored by Senators Rob Portman, Chris Coons, Mike Braun, Michael Bennet, and 21 others, the letter said while the Corporate SCS is still in development, the skeleton of the system is coming online and is already presenting serious challenges for US companies.
In September, news reports indicated that the Chinese Communist Party threatened to reduce the social credit scores of American companies unless they acknowledge Macau, Hong Kong, and Taiwan as part of China.
"What our country witnessed recently with respect to the National Basketball Association (NBA) over a tweet by one American team's general manager is not an aberration, but the latest in a litany of attempts by China to deploy its state and economic power to bend American entities to its will, they said.
It seems the SCS is designed, in part, to further and formalise this practice, they apprehended.
For these reasons, formal US government research, reporting, and analysis about China's Corporate SCS is critical to examining the terms of competition for our companies operating in and competing with China, the Senators wrote.
Given the high stakes for open markets and our free market system, we urge you to ensure that this system is closely examined and considered in all relevant US government reports, they said.
The inequities and imbalances in our trade relationship with China are well-known, said Portman.
China's proposed corporate social credit system will only perpetuate those inequities and imbalances by using state-backed economic power to bend American companies, including their employees, to Beijing's will, he said.
What we saw recently with respect to the NBA is not an anomaly, which is why our government needs to treat the impacts of the corporate social credit system as a priority, Portman said.
The Corporate Social Credit System is only the most recent example of China's efforts to exercise control over the activities of individuals and businesses operating within China, said Coons.
American companies need to decide how to respond to Chinese attempts to stifle freedom of speech, he added.
If the Chinese government implements the Corporate Social Credit System in a manner hypothesized in its party statements, it will pose a grave threat to American workers and businesses, said Braun.
In 2014, the Chinese Communist Party issued its Planning Outline for the Construction of a Social Credit System (2014-2020), which telegraphed the party's efforts to create a unified algorithmic system to grade both domestic and international firms against more than 300 state-determined criteria, with the goal of building a Socialist harmonious society, the letter said.
According to the Senators, all corporate data collected and processed through the Corporate SCS will travel through basic infrastructure, databases, and algorithms managed by a consortium that includes Taiji Computer, Huawei, Alibaba, Tencent, and VisionVera.
Key criteria informing the algorithms of the system could also be implemented in a manner that allows the Communist Party to extraterritorially pressure compliance with party doctrine and to suppress dissent, the letter said.
Once the Corporate SCS is fully operational, firms with scores below a certain state-determined threshold will face an interlocking series of sanctions across multiple Chinese government agencies, including restrictions on procurement and business licenses, less favourable interest rates, higher inspection rates, and even potential debarment from the Chinese market, the Senators wrote.
Scores can be affected not only by the actions of the company and its employees, but also by the actions of supplier or partner companies, extending the threat of Chinese retaliation to any American firm with a presence, or supplier, in China, they said.
Equally, if not more concerning, penalties under the Chinese Corporate SCS could extend to the employees of American firms, including US nationals. As a punishment for individuals representing companies deemed untrustworthy, the Chinese government envisions levying travel restrictions, tax discrimination, personal sanctions, and other retributions, the Senators wrote.
In this respect, there are few punishments that can be ruled off the table, as the Communist Party's disregard for the rule of law, checks and balances, transparency, and a free press could result in a broad array of unjustified punishments, they said.
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