Saturday, November 15, 2014

China's Bulgarian Corn Connection

On November 11, China received its first cargo of imported Bulgarian corn. This corn represents China's new approach to agricultural trade in which Chinese entities control the commodity from its source. This corn was grown by a Chinese company on soil that happens to be in Bulgaria.

The 36,700-ton cargo--identified prominently in news media as "non-GMO"--was received at the Shenzhen port, where it was promptly inspected and testing with expedited "green channel" procedures for agricultural cargoes. This treatment stands in contrast to other cargoes which are turned away or languish in their berths for weeks waiting for port officials to approve the shipment.

A representatitve of the importer--Tianjin Nongken Longchen Jiayi International Company--notes that the corn was grown in Bulgaria to be sold back to China. The company plans to import 175,000 metric tons of corn in 2014 and hopes to import 300,000-500,000 tons next year.

The corn shipment is the first tangible result of an agricultural investment strategy targeting Bulgaria. Several years ago commercial officers at China's Bulgarian embassy recommended Bulgaria as a potential site for Chinese companies to launch agricultural investments on the European continent as part of the Chinese "go global" strategy to grow crops overseas for the Chinese markets. A number of companies have been exploring possibilities, but the Tianjin company's investment in grain and oilseed production is the flagship project.

The investor in Bulgarian farming is a company created by the State farm system in China's Tianjin municipality ("Nongken" is an abbreviation of "agricultural reclamation", part of a national network of state-owned farms that operate swathes of land converted to farms on the forest or desert frontier, reclaimed coastal lands--like Tianjin--or tropical plantations.)

Tianjin Nongken has political support. In May 2014, a member of China's Politburo and Party Secretary of Tianjin Municipality visited Bulgaria at the invitation of the head of Bulgaria's Socialist Party. The Chinese official conveyed greetings from the Chinese premier and was briefed on the agricultural investment project. The agreement allowing Bulgarian corn to be imported to China was signed 3 months later. Diplomats said an earlier agreement to establish import protocol for Bulgarian corn was signed to facilitate the Tianjin Nongken project.

Also in May--perhaps by coincidence, perhaps not--Minister of Agriculture Han Changfu urged State farms to form shareholding companies and conglomerates and endorsed them as main players in China's agricultural "go global" strategy.

In 2011, Tianjin Nongken set up a company in Bulgaria with investment of 30 million Euros, renting 30,000 mu (2000 hectares) of land in northwestern Bulgaria to grow corn and other crops using local labor.

According to the Politburo official's briefing during May, Tianjin Nongken planted crops on 127,000 mu in Bulgaria during 2014. They expect to produce 25,000 metric tons of corn, 10,000 tons of wheat, 4,500 tons of sunflower seeds and rapeseeds, and 3,500 tons of other oilseeds. An online posting by Tianjin Nongken's trading company offers corn, alfalfa, wood products, sunflower oil, Bulgarian wine, distillers dried grains, and other grain products. The company has warehouses near the Varna port and has acquired a Bulgarian flour mill and a sunflower seed processor.

Chinese overseas agricultural investors encounter a lot of problems. Tianjin Nongken planted their first Bulgarian crop in 2012 but production was disappointing (they were hoodwinked by Bulgarian partners?). The land was fragmented into numerous parcels and much of the land was not usable for farming. Transportation was poor and the level of economic development was low. The Tianjin Nongken company packed up and moved their operation to another part of Bulgaria. They signed another agreement to buy and rent 130,000 mu (8,700 ha) with investment of 270 million Chinese yuan (about US$ 44 million).

According to the diplomats' report, a Beijing company has rented 500 hectares of land in Bulgaria to grow vegetables in greenhouses. They are just getting started but expressed frustrations over lack of labor and poor English skills of workers. They plan to bring in more Chinese companies to help them.
Chinese investors complain that buying land in Bulgaria is risky due to frequent disputes over ownership "for historical reasons." The legal environment is poor, efficiency is low, it's hard to consolidate land parcels (sound familiar?) and organized crime and "interest groups" are a problem.
The diplomats say the China-Bulgaria agricultural relationship is constrained by differences in language, customs, culture, and ideas. Bulgarian workers have poor English, communication is difficult, and misunderstandings are common.

Returning to the 36,700-ton Bulgarian shipment--this single shipment exceeds the Tianjin Nongken's entire production in Bulgaria this year. The trading company's plan to bring in 175,000 tons means that the company is getting corn mainly through traditional purchasing channels. This illustrates the impossibility of completely controlling grain supplies from production to port.

Friday, November 14, 2014

China Corn Support Price Unchanged

According to information learned by Futures Daily, China's support price purchase program for 2014/15 is expected to begin by November 20 with the support price level unchanged from 2013/14. The support level is higher than current purchase prices and is expected to boost Chinese prices and add to the nation's corn stockpile. Temporary reserve purchases are expected to take place from November 20, 2014 through April 30, 2015.

Futures Daily learned from sources that the support price for corn will be the same as last year. This is a break from the practice of raising the support price annually over the last six years.

Current prices are 100-200 yuan below the support levels. Traders will be inclined to sell the corn they buy to the state reserves, thus boosting market prices.

ProvinceSupport priceCurrent prices
Inner Mongolia (Tongliao) 22602160-2180

The information is reportedly confirmed but is awaiting final approval by certain government departments. An official announcement is expected by November 20, 2014.

This year, corn can be purchased for the temporary reserve by Sinograin--the Government's reserve management corporation--as well as two other state-owned companies: COFCO and Chinatex.

Purchases for the temporary reserve will no longer be open-ended. This year there is expected to be a 40-mmt limit on the total volume of corn purchased. The limit is due to the large inventories already on hand from last year. Reportedly, COFCO will be allowed to purchase up to 12 mmt and Chinatex up to 2 mmt. Presumably, Sinograin will be limited to the remaining 26 mmt.

Purchasers will get a subsidy for their operational costs of 50 yuan/mt, down from last year.

According to other calculations, following auctions and transfers since April, authorities may have over 60 mmt of the last two years' temporary reserve-purchased corn in storage, most of it from 2013/14.

With market prices below the support prices, it looks like more corn will be added to the stockpile over the next few months. Another round of auctions to dispose of the stockpile will likely be held again next April.

It is also rumored that the subsidy for transporting corn from northeastern provinces to other parts of China will not be offered this year. Last year, it led to a perverse pattern in which prices in northeastern provinces were higher than in north China provinces like Shandong and Hebei.

Thursday, November 13, 2014

Transfers Keep Rural Counties Afloat in China

When Chinese officials describe their grain subsidy programs, they say the policies motivate local (officials) and farmers, in that order. This rhetoric reflects the importance of transfer payments sent to rural counties to encourage local officials to support grain production, an activity that generates minimal GDP and virtually no tax revenue.

With private financing and services for farmers mostly nonexistent, China relies on local officials to provide needed investment and services for farm production. Yet officials are not inclined to give attention to farm production since it yields little GDP and virtually no tax revenue. China's major grain-producing counties have a very narrow tax base, with local tax revenues often just 15%-to-20% of financial expenditures. Thus, rural governments are financed with massive transfers from higher levels of government.

An October 2013 article in Economic Reference News, "Vicious Circle: The More Grain Produced, the More Backward the Economy," raised concern that "the rice bag can't compare with the money bag," and "central government supports agriculture, local government has little regard."

A recent article in the Government-run magazine Liaowang (Outlook) with a similar theme highlighted the problem of poor finances in grain-producing counties. It illustrated the problem with Jilin's Lishu County, the fifth-largest grain-producing county in China. The local government there collects essentially no tax revenue from grain production. Farmers were exempted from the "agricultural tax" about ten years ago. Sales and initial processing of grain and most other farm products is exempt from value-added tax. In 2013, Lishu County's tax revenue totaled 556 million yuan, but its financial expenditures were 2.94 billion yuan--more than five times tax collections.

In contrast, city governments raise vast sums of money by converting agricultural land to other uses, conjuring instant wealth out of thin air. Rural grain counties are pressured to protect cropland from development, thus denying local officials the road to riches traveled by their city-based comrades. Rural county officials say potential investors are scared off by rhetoric about "seizing grain" since it implies few development opportunities.

The financial shortfalls of rural counties prompted China's central government to start up a transfer payment "award" program for hundreds of major grain-producing counties in 2005. The counties are ranked based on a formula that weights grain production, area planted in grain, and the amount sold outside the county. Initially, the transfer awards were just to fill holes in rural county budgets and there were no strings attached to the funds. A "super grain county" gives additional cash to the best-performing counties. Oilseed counties and pork counties now get similar payments. These newer transfers must be used to support subisides, loans, and services to farmers.

The plan for raising production capacity 50 mmt during 2009-2020 identified 800 core grain-production counties (about a third of all counties in China).

Authorities have been distributing 2014 award funds in October and November.

Jiangxi Province received 1.1 billion yuan in award funds for 46 grain counties (about 25 million yuan each), plus the province got 200 million yuan for being a commercial grain-supplying province.

Jiangsu Province got 1.66 billion yuan for grain county awards. This included 1.18 billion yuan for regular grain county awards, 153 million yuan for "super grain county" awards, 78 million yuan for oilseed county awards, and 252 million yuan for being a grain-supplying province. The "super grain," oilseed, and grain-supply province funds are earmarked for activities to support production, especially a campaign to refurbish or build grain storage facilities.

Guangxi Province has installed an evaluation system for counties receiving grain county awards. The funds fill holes in county budgets and should be used for improving fields, building storage and processing facilities. The funds should not be used for buying cars, office buildings, "training centers," or "image projects."

Sihong County in northern Jiangsu Province got 34.6 million yuan in grain county award funds, plus 15.3 million yuan for being a super grain county. Sihong has protected farmland, introduced new varieties, improved fields, built water projects, and supported new-style large farms and cooperatives.

Minquan County in Henan Province got 39 million yuan for its grain county award in 2013, over ten times the amount received in 2005. Officials there say they have paid a lot of attention to grain production in recent years and have made progress in implementing the award fund assessment.

Jilin's Lishu county used to collect about 58 million yuan from farmers for the agricultural tax before it was eliminated in 2004. Its "award" for being a major grain county now is 124 million yuan. It also got 350 million yuan (about $130 per acre) to distribute to farmers as grain subsidies. The county spends about 20 million yuan on roads, 8 milloin yuan on agricultural insurance, and nearly 100 million yuan on water and irrigation projects.

To the extent that local governments devote personnel and material resources to grain production, the cost of producing grain exceeds costs reported by farmers. Thus, local officials complain that the price of grain sold to urban areas doesn't reflect the full cost of the grain.

The Liaowang article calls for setting up a system for transferring funds from wealthy grain-consuming localities to rural counties that supply grain. This idea has been pushed for a number of years but doesn't seem to have progressesd.

Tuesday, November 11, 2014

Regulating Dog Meat Trade in China

Consuming dog meat is a deeply embedded part of food culture in certain regions and ethnic groups of China. However, the growing number of dog lovers has generated fierce opposition to the practice of killing dogs and eating them. Dog meat trade is legal, but regulating the production and marketing of dogs for human consumption presents a challenge for authorities.

[warning: images in this article will be disturbing to animal lovers]

The focal point of attention is a dog meat festival held each June in the city of Yulin, Guangxi Province. During 2014, the festival prompted protests and an appeal from an animal protection group to ban the festival. With so much public opposition, the Yulin municipal government issued a statement stating that the festival is put on by private operators, and Yulin authorities disavowed any role in organizing the festival. Another dog meat festival in Zhejiang Province has been canceled due to public opposition to the killing of dogs on street corners.

A man inside a dog cage protests eating of dog meat
outside a slaughter point in Guiyang.

Consumers of dog meat respond that it's no one else's business what they eat and the government has no right to interfere. A weibo post argued that the customs of ethnic groups that consume dog meat should be respected. A 2010 article noted that legal experts were formulating a proposal for an animal protection law that would assess large fines to enforce a ban on eating dog and cat meat, but noted that such a law would affect the "dog meat economy" in certain parts of Jiangxi Province.

Buddhist protestor at Yulin dog meat festival

A more practical and immediate concern is the regulation and supervision of the production and distribution of dog meat to ensure sanitation and safety. During the 2014 Yulin dog meat festival there were accusations that dogs were kidnapped from owners to be butchered, that rabies is spread by sick dogs, and that the supply chain is mostly unregulated.
Dogs are delivered packed into small cages.

Regulating meat supplies poses a challenge on several fronts. The supply chain involves activities that are regulated by a variety of different authorities. Agricultural authorities are responsible for production of animals and feeds. Slaughter is an industrial process under technical supervision bureaus, marketing is under industrial-commercial bureaus, and restaurants are supervised by health departments. None of these officials have authority to make arrests, so police are often involved. A second problem is that production occurs in rural areas far from the cities where the meat is consumed.

News media investigations indicate that there is a dog meat supply chain much like those for other types of meat industries. Many of the dogs are raised on a small scale by farmers. Dealers come to villages to buy dogs, load them on to trucks, and transport them to wholesale markets or restaurants in various cities like Yulin. Sometimes they are butchered in slaughterhouses but many are killed by vendors at the point of sale.

There are no national standards for dog meat since this is a relatively small niche industry, but in 2013 the Ministry of Agriculture introduced a rule governing marketing of dog and cat meat. The rule requires that each dog be accompanied by three certificates--a health inspection, vaccination, and a lab test report. Producers are supposed to keep health and vaccination records for each animal. Dogs are supposed to be slaughtered in a facility designated by the government. The facility should file a report with authorities on the animals 6 hours before slaughter and again at the time of slaughter.

Dog farm

According to one estimate, the cost of transporting and acquiring all the required certificates would be 200-300 yuan per animal. The farm-level purchase price is about 9 yuan per 500g (about $1.50/lb). With such high costs, producers are not inclined to comply with the rules.
Certificates for dogs leaving a county
and disinfection of truck

China Youth Daily raised concerns that vendors at the Yulin dog meat festival either failed to display the required certificates or had a single certificate for hundreds of dogs. Many are butchered on the spot by vendors.
dog slaughtered on the street. 
A Beijing Evening News journalist investigating the Yulin dog meat industry found an extensive supplier network. Some dogs came from villages in Yunnan, Shaanxi and Hubei Provinces where dealers go door to door buying them. Truckloads of dogs are inspected by animal health officials in the municipality where they are procured, certificates are issued, the truck is photographed and disinfected and sent on its way.

The three certificates required by MOA are issued by authorities in production areas. When a truck loaded with dogs arrives in Yulin, officials there check it again and release the dogs for sale in markets or to restaurants if no problems are found. Authorities in Yulin wait by the highway (probably at the toll booth) to check trucks as they arrive. They claimed to have turned away two trucks that were not compliant. In the Yulin wholesale market, the reporter saw certificates issued by animal health bureaus in Mengzi City, Yunnan and Weinan City in Shaanxi on display.

Officials also have to supervise the marketing of dogs from the area surrounding Yulin where an estimated 400,000 dogs are raised for meat. Officials say some people steal dogs, but most are raised by villagers. In one village house, he saw 3 or 4 rooms filled with dogs. Local officials acknowledge that the Yulin area has a high incidence of rabies, and there are about 100 deaths from dog bites each year. Animal health officials say rural people don't know they should get treated after a dog bite. They say rabies is not transmitted by eating meat of infected animals.

One official in Yulin estimates that 200 dogs are consumed per day in the area, but it goes up to 2000 per day during the peak summer months when the festival is held. It's estimated that 400,000 dogs are raised for meat in the area around Yulin. With three certificates per dog--as required by MOA's rule--that would be 1.2 million certificates to keep track of.

Dogs from outside Yulin are supposed to be slaughtered in one of eight local slaughter facilities. These are said to be overseen by three groups of inspectors who go out to check them daily.

Many people in China are now revolted by the dog meat industry, but there are many parts of China where dog meat is part of daily life and a source of income. There is no law banning dog meat. If such a law were to be introduced in China, how would it be accomplished? There is no mechanism for voting on a referendum. Nor is there a mechanism of voting in or out candidates that support or oppose dog meat consumption.

Regulating the dog meat trade is a challenge. Authorities have been struggling to regulate the major meat--pork. Establishing supervision for a relatively small industry like dog meat and closing all the loop holes is daunting.

These are some of the issues China is dealing with as it tries to transition from a collection of semi-autonomous city-states to a nation ruled by law.

Monday, November 3, 2014

Shaanxi Farmers Reluctant to Rent Land

The results of a new survey show that "farmers view land like gold, and they're reluctant to give it up." Villagers' uncertainty about their rights to their land makes them reluctant to let go of it, posing a problem for the new class of large farms looking to consolidate farmland.

On October 13, the Shaanxi branch of the National Bureau of Statistics rural survey team announced the results of a survey of rural land transfer conducted in 2013. The survey found that 11.8 percent of the province's contracted land had been transferred from its original "owner" or contractor to someone else. That rate was lower than the national average of 21.7 percent, and much lower than the 40 percent share of land transferred in some eastern provinces, according to the survey report.

Of the 11.8 percent of land transferred, 64 percent of it is rented to neighbors and relatives they know, often just on a verbal agreement. About 13 percent each is transferred to companies or cooperatives, and 11 percent to "others." They seldom rent to a person or company from outside their village.

The Shaanxi study claims that villagers are supportive of land transfer but they are afraid to let go of their land since they are worried they might lose their rights to the land and/or the subsidies attached to the land. Villagers working off-farm want to have their land as a fall-back in case they lose their job and have to take up farming again. In some places on the outskirts of cities, villagers are holding on to their land hoping for a big payday from developers.

The report gives the example of a farmer who has 20 mu (3+ acres) of his own land plus 200 mu he rents to grow wheat. All the land is on a flood plain (so it's probably classified as "waste"land that is not a core part of the village's land contracted to collective members). The farmer would like to rent 1000 mu (165 acres) to grow grain, horticultural crops, and raise livestock, but coordinating with collective members to consolidate a large parcel of land is difficult.

With villagers reluctant to let go of their land, rents have gone up to over 1000 yuan per mu (about US$ 1000 per acre). With such high rents, producers are inclined to use rented land to grow high-value crops instead of grain.

In Shaanxi direct subsidies for grain range from 56 yuan per mu to 81 yuan per mu, depending on the region. This is equal to 25-35 kg of grain or less than a day's wages and you get the subsidy whether you grow anything or not. Large-scale farmers say the subsidies don't have much impact now. They would prefer to get help with financing.

The inclination to rent land has always been relatively low in Shaanxi. In 2007, Shaanxi reported only 2 percent of its land had been transferred, compared with a national average of 6-to-7 percent that year. Since then it has risen fast. Shaanxi's land transfer was up to 5.7 percent in 2009, 10 percent in 2012, and 11.8 percent in 2013.

Shaanxi officials have been trying hard to promote land transfer. In an article earlier this year, Shaanxi officials said land transfer was very important to releasing surplus rural labor and promoting coordinated rural and urban development. Officials attributed Shaanxi's low rate of land transfer to the province's low level of development, few large-scale farmers, and villagers' lack of understanding of the land policy. Officials said villagers were afraid the policy might change after they entered a land transfer agreement and they would then lose their land. So they would rather leave their land idle than rent it out to someone they don't trust.

Shaanxi has been setting up township and county offices to coordinate land transfer, settle disputes, etc, but this has been disrupted by a  consolidation of townships. Some 17 percent of townships have been eliminated as administrative units and have no funds to support the land transfer services. In 2011, the province issued a document offering financial support for land transfer but little of the promised money has been allocated.

Many of the verbal agreements are vague, and disputes often arise over the deals. Multi-year rental agreements often set a one-time rental fee that doesn't change. When rents and prices go up in later years, lessors want to renegotiate the rent. Some rental contracts extend beyond the period of the lessor's contract on the land, posing possible disputes in the future. Some renters change the use of the land to a nonagricultural use after getting control of the land.

Shaanxi officials want to bring their land transfer rate up to the national average. In May, another policy document was issued to promote land transfer. They will educate villagers about the importance of land transfer and their rights. Within 3 years they plan to issue certificates of land rights to all villagers.

A provincial fund to support land transfer will be initiated. In developed regions, villagers will get a subsidy of 100 yuan per mu if they rent out their land. In poorer areas, the large-scale farmers, companies or cooperatives renting-in land will get the subsidy.

Tuesday, October 28, 2014

Chinese Agriculture: Don't Panic, We're Planning

On October 24, Vice Premier Wang Yang finished out a speech on building irrigation facilities with some comments that reveal China's rural policy challenges. While there is a sense of urgency in his remarks, Wang exhorted everyone to calmly consider the future and--like a good socialist--make a new plan.

English language news media picked up Wang's admonition to increase control of grain imports and crack down on smuggling to deal with record-high grain inventories, but other comments in the speech are interesting.

The comments came at the end of a speech on building irrigation facilities where he warned that rural reforms and development tasks are extremely arduous. He exhorted every level of government and locality to do a good job on agricultural and rural work as they carried out irrigation and water management construction.

Until now, China seemed to be address rural problems by spending more and raising prices, but that seems to have come to an end. Wang warned that agriculture faces "three ceilings" on prices, subsidies, and commodity inventories. Agriculture also faces a rising floor in escalating production costs. The problem is how to maintain farmer production incentives and keep production stable under these "two pressures," said Wang. How can sustainable agricultural development proceed with excessive consumption of resources and environmental pollution growing? Wang admonished listeners to "calmly assess the future," "sort out ideas for agricultural and rural work," and "scientifically" formulate a plan for the future.

Wang assured his audience that the government is pondering new policies to address the many new problems, situations, and challenges facing agriculture and rural areas as it formulates a new five-year plan for 2016-20. For example, Wang said, the government is contemplating how to keep increasing spending on rural affairs and increase rural incomes as the economy decelerates and growth in financial revenue slows.

Wang said the minimum price programs for wheat and rice should be carried out, and "temporary reserve" stockpiling for corn--the policy that created the mess--should be started at the appropriate time. Wang said the decision to announce the 2015 minimum price for wheat at the same level as this year is a result of pressure from international market prices and is an "extremely vigorous price signal" to producers.

In his comments on the fall grain harvest, Wang warned about the conspicuous problem of a tight grain storage situation with record-high grain inventories as the fall harvest is underway. With Chinese grain prices higher than world prices and grain imports rising, marketing the new grain crop faces a lot of problems, Wang said. He called for making space for the new crop in private sector storage facilities. Companies should be "organized" and "guided" to purchase grain from farmers. Banks should ensure that they have plenty of money to buy the grain, so farmers are able to sell it.

Wang's comments also included an exhortation to carry out the communist party's fourth plenum's task of instilling the "rule of/by law" in agriculture and rural areas. This was not explained but probably means standardizing regulations and they way they are enforced throughout the country--a stiff challenge in a country where "the hills are high and the emperor is far away."

Wang closed out his speech by reminding comrades to strengthen water management construction and do a good job on rural work. "The responsibility is great and the task is formidable," said Wang.
Vice Premier Wang Yang speaks October 24, 2014 at a
State Council teleconference on building irrigation facilities.

Wednesday, October 22, 2014

China Plans Massive Honesty Database

Chinese leaders have apparently deduced that dishonesty and lying are not conducive to a healthy society or economy. Authorities are moving forward with a plan to create a massive database that will enable authorities at all levels and locations to monitor, track down, and punish miscreants in government, companies, and courts of law.

For example, it's hard to produce accurate statistics when everyone lies to the statisticians. To fix this, China's National Bureau of Statistics has published draft regulations designed to punish dishonest companies that report inaccurate information on statistical surveys. Companies that deliberately fabricate false data, make false reports, conceal data or otherwise violate the statistical law will be subject to criminal penalties. The Bureau will publicize the names, addresses and owners of dishonest companies on a web site. The information will be entered in a file that will be available to commercial/industrial authorities, tax bureaus, credit information systems and banks, which will affect their ability to legally register, collect government subsidies and get loans. Dishonest companies will be on the list for one  year  unless they successfully apply for removal by demonstrating good behavior. If they're still bad, they will stay on the list a second year.

The purpose of the new regulation is to improve the quality and credibility of statistics. The Bureau is accepting comments on the draft regulations until November 5, 2014.

The Statistics regulation is a small part of China's broad campaign to create an honest society described in the State Council's Plan for Constructing a Social Credit System (2014-2020) released in June 2014. The plan aims to create a complete system of records that covers all members of society to establish a culture of honesty. It is much more than a system for recording whether people pay their bills. It aims to maintain files on bad behavior in government, companies, and courts that will be shared nationwide with all government departments. The records will include dishonest government officials, safety violations, fakes, false advertising, frauds, pollution, etc. The universal nature of the database appears to be intended to address the ease of miscreants disappearing and reappearing some place else where authorities don't know about their record of bad behavior elsewhere.

The honesty system seems to be part of the campaign to promote "rule of/by law" ahead of the "fourth plenum." Like other components of the "law" campaign, the honesty system points backward into Chinese traditional culture for inspiration and moral guidance. The plan instructs Chinese people to "carry forward traditional virtues of integrity as an inherent requirement, giving incentives for trustworthiness and constraining dishonesty." Name and shame appears to be the moral mechanism--no deities, Ten Commandments, St. Peter, or Western religious/philosophical approaches to ethics and morality.

According to the plan, the social credit system is necessary to implement the scientific development concept and form a foundation for a harmonious society and a socialist market economy. It's an important measure for governance and for improving the nation's competitiveness.

The social credit system promises to increase honesty in government, business and courts. The system promises to broaden the public's participation in government decision-making, but it also will "increase its policy-making, enforcement and supervision powers, and publicize policies."

For commercial entities, the system is supposed to lubricate business transactions. One emphasis is on recording unsafe production practices by mines, use of unsafe chemicals, fireworks and pollution emissions. Another focus is on recording quality infractions by food, drug, agricultural products, and agricultural input suppliers so that various government departments in different localities can exchange information about miscreants. The social credit system will cut down on financial fraud, running away from debts, insider trading, fraudulent insurance, illegal accumulation of assets, and taking money out of the country illegally.

You can run, but you can't hide from Big Brother with Chinese characteristics.