The People's Bank of China (PBOC) has picked Shanghai to pilot a scheme to set up a credit rating system for individuals as demand for personal credit escalates.
Shanghai Zixin has been established between the central bank's Shanghai branch and the municipal government to collect private borrowers' credit history and repayment obligations from state and commercial banks and other legal sources.
Plans to start the scheme have been on the drawing board for two years but were only launched recently after the municipal government's robust support and Beijing's determination to cut down internal dangers posed to its banking system in the wake of the Asian financial crisis.
The company was established after the central bank sent study teams to the United States and Hong Kong to look at how their experiences could be adapted for local use.
A PBOC Shanghai branch official said: 'Setting up a credit system is not easy overseas and will be tougher in the mainland.
'But we still want to try and build up a database of private borrowers' credit standings, which will allow banks to use for reference later in extending personal credit.
'This is crucial to our on-going plans to cut down the level of potential bad debts in the banking system.' Only state and domestic commercial banks will take part in the scheme initially although foreign banks could be included after they gain access to retail banking.