Tiffany Hsiao (Taiwan)
Nadine Cheng (mainland China)
On February 28, 2018, Specific Measures on Promoting Cross-Strait Economic and Cultural Exchanges and Cooperation (hereinafter, the “31 Measures to Benefit Taiwan”) were promulgated in mainland China to point out that “credit investigation institutions in Taiwan can work with credit investigation institutions in mainland China to provide credit investigation services for compatriots and enterprises on both sides of the Strait.” If credit investigation mechanisms can be shared and linked in the future, it will be helpful for banks on both sides of the strait to grasp the credit status of enterprises in mainland China and Taiwan and reduce local lending risks. The opening of financial credit investigation does not target Taiwan only. The authorities in mainland China have announced that restrictions on credit rating services provided by foreign-funded financial service companies will be eased and national treatment will be provided to foreign-funded credit investigation institutions. With respect to Taiwan, before the 31 Measures to Benefit were promulgated, cross-strait financial credit investigation cooperation was only implemented in some areas. For example, a cross-strait credit information inquiry system which was set up for the first time in the Fujian Free Trade Zone in mainland China can overcome lingering credit issues such as credit investigation, guarantee and financing.
Relevant requirements for financial credit investigation
The establishment of a service enterprise that processes and exchanges credit information among banks requires an approval of the competent authority, namely, the Financial Supervisory Commission, which shall also regulate the operation of such enterprise. Currently, the service enterprise that processes and exchanges credit information is the Joint Credit Information Center (hereinafter, the “JCIC”). The currently applicable laws and regulations include Article 47-3 of the Banking Law (amended on November 1, 2000), the Regulations Governing Authorization and Administration of Service Enterprises Engaged in Interbank Credit Information Processing and Exchange (enacted on December 30, 2000) and the Guidelines for the Supervision and Administration of Foundations by the Financial Supervisory Commission (enacted on April 15, 2005). The JCIC is not only highly regulated by the government in Taiwan but also adopts a “membership system” in its operation. Other than that, there is no further specific laws and regulations for the credit investigation industry in Taiwan.
This shows that credit investigation is highly regulated in Taiwan, and the collection, processing, use and transmission of personal data relating to credit investigation should also follow relevant requirements under the Personal Information Protection Act.
With respect to credit investigation agencies in China, credit investigation agencies set up to operate personal credit investigation business pursuant to the Regulations on the Administration of the Credit Investigation Industry shall meet the incorporation criteria and specific conditions and shall be approved by the regulatory authority for the credit investigation industry under the State Council. For the establishment of a credit investigation agency that operates corporate credit business, if the incorporation conditions are met, it will be sufficient to record with the local dispatched agency of the regulatory authority for the credit investigation industry under the State Council. In addition, the Circular on Strengthening the Compliance Administration of Credit Investigation and the Guiding Opinions on the Administration of Financial Institution Credit Investigation were released successively to ensure the compliance of credit investigation operation and the security of data.
Therefore, the credit investigation industry in mainland China is also highly regulated with a great emphasis on the protection of relevant data.
The necessity for the establishment of a cross-strait credit investigation system
In the past, local Taiwanese banks participating in corporate lending business in mainland China experienced default problems with China Lumena New Materials Corp. and Ultrasonic Shoes Co., Ltd. The claim in the Ultrasonic Shoes matter was as high as NT$1.66 billion with six victim banks that had to continuously and laboriously investigate through mechanisms in Hong Kong, mainland China and Taiwan to successful collect evidence relating to fraudulent loan applications. This indicates the huge risks inherent in the financial industry in mainland China. How to thoroughly review the financial conditions of enterprises is a key to a bank’s lending operation. Therefore, if cross-strait joint credit investigation mechanism can be shared and expanded, this is indubitably a strong boost to the development of the financial industry.
Successive releases of relevant measures by local governments in mainland China.
To accommodate the promulgation of the 31 Measures to Benefit Taiwan, various local authorities in mainland China have successively released relevant implementation policies. In the area of credit investigation cooperation, the spokesman of the Taiwan Affairs Office stated during a regular press conference on May 16 that Shanghai Credit Information Services Co., Ltd., a subsidiary of the Credit Reference Center of the People’s Bank of China, has cooperated with Taiwan’s China Credit Information Services, Ltd. to jointly launch the Taiwan Regional Credit Report Inquiry System to provide financial institutions in mainland China with inquiry services concerning the credit records of enterprises and individuals in Taiwan and to help Taiwan-funded enterprises and Taiwanese people resolve financing issues in mainland China.In the past, Taiwanese people seeking to obtain loans from Taiwan-funded banks in mainland China mostly had to apply to the Joint Credit Information Center in Taiwan for information before applying for the loans. The procedure was more cumbersome. After the credit investigation cooperation project was initially piloted in Shanghai, it is expected that the impact will expand to other areas. It is believed that this will definitely be beneficial to Taiwanese people or small-sized Taiwanese businesses. The Xiamen Municipality has also promulgated the Specific Measures for Further Deepening the Economic, Social and Cultural Exchanges and Cooperation between Xiamen and Taiwan, launched cross-strait credit inquiry services in Xiamen, promoted cross-strait interconnection and intercommunication of credit information, set up the Cross-Strait Credit Service Center of the Xiamen Area of the China (Fujian) Pilot Free Trade Zone to address credit information needs of Taiwan-funded enterprises and provide convenience to Taiwanese investors through credit report financing and loans, and provided proper subsidies for the interest or guarantee fees of credit financing and loans obtained by Taiwan-funded enterprises in this area. In addition, the Shanghai Municipality has also formally promulgated the Measures for Implementing the Promotion of Economic and Cultural Exchange and Cooperation between Shanghai and Taiwan on June 5. For the development of business cooperation with credit investigation agencies in Taiwan, preferential treatments are provided on a prioritized basis in areas such as business matching, negotiation channels, qualification verification and cooperative directory.
In fact, however, the Fuzhou Central Branch of the People’s Bank of China and Fuzhou in the Fujian Free Trade Zone worked with Shanghai Credit Information Services Co., Ltd. in April 2016 to launch the Taiwan Area Credit Report Inquiry System, and banks in Fuzhou which have signed a cooperation agreement may query personal and corporate credit reports through such system. Based on the understanding of this law firm and private credit investigation agencies in Taiwan, such mechanism is operated through mutual entrustment between Shanghai Credit Information Services Co., Ltd., which is affiliated with the People’s Bank of China, and the private credit investigation agencies it collaborates with in Taiwan so that credit information of both sides can be mutually obtained. Such model of cross-strait credit investigation cooperation has been in place for years. Therefore, whether the cooperation through such query system and the promulgation of the 31 Measures to Benefit Taiwan can actually resolve financing issues facing Taiwanese people in mainland China still depend on detailed measures to be promulgated to accommodate the 31 Measures to Benefit Taiwan by various local governments in China.
In Taiwan, the financial industry is always highly regulated with absolutely no exception for credit investigation involving personal data. In comparison, regulatory measures such as government approvals are also implemented in this aspect in mainland China. Therefore, although there has been cross-strait cooperation among private organizations, still it is limited to certain areas. In addition, if both sides of the Strait actually intend to allow direct exchanges and cooperation among financial institutions without waiting for the resolution of relevant requirements through entrustment by credit investigation agencies on both sides of the Strait, it would still be insufficient to rely on the 31 Measures to Benefit Taiwan, which represent a simple declaration issued by China to promote cross-strait credit investigation cooperation. Not only is it necessary to rely on detailed laws and regulations to be successively promulgated in various jurisdictions in China, positive responses, negotiations and cooperation from the Taiwan government are also required so that the intent of the 31 Measures to Benefit Taiwan can be realized.
Before that, enterprises are advised to consult legal service law firms which have practical experiences in mainland China, Hong Kong and Taiwan, can smoothly cooperate, provide inputs on compliance with respect to cross-strait credit investigation and personal data, and review cross-strait cooperation contracts. In addition, attention should be paid to the subsequent developments of various local governments in China in the wake of the 31 Measures to Benefit Taiwan and the responses from the Taiwan government. It is hoped that such measures are not unilateral acts and can create mutually beneficial linkages to facilitate cross-strait economic interactions and development of Taiwanese investors in mainland China.
 Article 3 of the Regulations Governing Authorization and Administration of Service Enterprises Engaging in Interbank Credit Information Processing and Exchange
 Articles 6 and 10 of the Statute for the Administration of Credit Investigation Business