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Australian companies operating in China will soon be forced to hand over sensitive commercial data to Beijing and will be penalised if they don't comply with the Communist Party's investment priorities, as part of a radical new regulatory framework being rolled out for local and foreign businesses.
The new system will use thousands of data points to generate a "Social Credit Score" for companies based on their compliance with the likes of environmental standards, taxes, worker safety and the government's investment priorities.
"Companies should take the accelerating implementation of the system and its impact on doing business in and with China very seriously," said Mirjam Meissner from Germany's Mercator Institute for Chinese studies.
Reporting around the Social Credit System, which is due to be operational by 2020, has largely focused on the more Orwellian aspects for individual privacy, but the implications for business are equally significant.
"Both western and Chinese companies have genuine concerns about how the government will use the data it collects," said Ken Jarrett, the President of the American Chamber of Commerce in Shanghai.
"Can the government guarantee one firm that its database will not be shared with others?"
For the big Australian miners, healthcare companies and food producers the new system may require the handing over of sensitive sales and pricing information, which some fear could then be used by local competitors to gain an advantage.
The idea behind the system is to use so called "big data" to build a new regulatory framework which constantly monitors and evaluates a company's economic and social behaviour and thereby allows the government to reduce regulation in other areas.
The government will then penalise companies with poor social credit scores through higher rates of interest, taxes and by them having less chance of winning government contracts.
In extreme cases, the senior managers at companies with poor credit scores would be denied tickets on China's high speed rail network or on international flights, while their personal credit rating could also be affected.
"This will be a uniquely Chinese approach to economic and social management, and unfamiliar to most Western companies in China, particularly the consideration of non-economic behaviour," said Mr Jarrett, a veteran US diplomat and former director of Asian Affairs for the White House's National Security Council.
While Beijing sees a smoother regulatory environment, critics see as many wrinkles in the system as advances and worry it could be used as a weapon to further discriminate against foreign companies and to strengthen, not lessen, state intervention in the economy.
"It will be prone to failing technologies, data manipulation, and the politically induced, unidirectional allocation of investments," said Ms Meissner.
She believes foreign and local companies will be forced to channel investments into areas of state priority and will therefore have less autonomy in their overall decision making. It may also stifle innovation as it would make it more difficult for companies to allocate funding to disruptive business models outside the government's priority areas of investment.
And these concerns are before considering the protection of proprietary company data which she said would be at "constant risk".
"The system will create strong incentives for companies to make their business decisions and operations comply not just with laws and regulations but also with the industrial and technological policy targets laid down by the Chinese government," Ms Meissner said.
It suggests foreign companies, which are already locked out of the many of the most lucrative sectors of the Chinese economy like banking, telecommunications and transport, could soon be told where they can invest their capital.
"China's leadership is convinced of its ability to guide China's economy on a long-term path towards becoming an industrial superpower," said Ms Meissner.
This is at odds with previous commitments by the administration of President Xi Jinping to allow the market to play a "decisive role" and comes as efforts to open up the economy have stalled in recent years.
Fears that foreign and local businesses will be subject to more not less government control have been heightened by the Social Credit System being overseen by the Communist Party, rather than the bureaucracy.
The project will be coordinated by the Central Leading Small Group for Comprehensively Deepening Reforms, a body set up and chaired by President Xi himself.
It will then be implemented by the National Development and Reform Commission (NDRC), China's top economic planning agency, and The People's Bank of China (PBOC), the central bank.
"Foreign companies active in the Chinese market will be integrated into the system and treated the same way as their Chinese competitors. Foreign companies will also be subjected to the full extent of industrial policy guidance," said Ms Meissner.
Such implications for foreign and domestic businesses have been largely overlooked in recent months as the media and academics focus on the more Orwellian implications for personal privacy in China.
Some reports have suggested an individual's online activity could be monitored to help generate a Social Credit Score, using thousands of data points collected from the big e-commerce players, Baidu, Alibaba and Tencent.
Under one scenario floated by the government, this could see those who frequently play video games online penalised as such behaviour would supposedly be a marker for idleness. On the other hand, those purchasing nappies online may get a boost to their score as this would be a marker for responsibility.
"At a time when the Chinese government has used the protection of citizens' private data as one reason for insisting that Chinese companies use local server technology rather than foreign servers for back office operations, it's ironic that they will now be scouring a plethora of data sources to determine whether a company or person is socially fit," said Mr Jarrett.