The Social Credit System in China: What is it Really About?

The term ‘social credit system’ has been bouncing around the western media recently, usually leaving the international public somewhere between disbelief and denial. This is due to the controversial nature of the concept behind the term. Alas, this article will stray from the dramatic elements of the subject and stick to the factual.

New Social Credit System(s)
In 2014, the State Council of China reported a statement, in which they introduced plans for a strategy to curb what they termed the untrusting and unruly situation of the Chinese society. This was presented as a long-term strategy with the promise of implementation in 2020.

However, soon after the introduction, the State Council gave permission to a handful of private Financial technology companies, including the Alibaba Group and Tencent, to develop and deploy pilot systems under the Council’s guidelines.

The government benefits in several ways by allowing private companies to develop pilots. First off, government will not have to invest on preliminary research.

Secondly, whereas the pilots are voluntary, the 2020 version will be mandatory to all citizens, so in 2020 when the system is implemented, it will not produce a social-shock or an economic one, since the public has already been exposed to it.

Thirdly, private companies are more effective at collecting big data, especially since Chinese consumers have embraced non-cash payments, by using services provided by Fin-tech companies like Ant Financial. Currently China is the biggest mobile payment market, accumulating a ground-breaking $12.8 trillion in mobile payments in the first 10 months of the last year. Chinese citizens are highly dependent on financial technology, e.g.; using the Alipay app to pay utilities, rent or just day-to-day use like paying for your dinner at the local restaurant.

And finally, the risk of failure and resistance has been reduced drastically, with more than half a decade of testing and exposure.

What is it Made of, How Does it Work?
State Council’s concept is based around the idea that actions have consequences. As the government puts it, this will “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step.»

So far, the measurement of the 2020 credit score or basis for the measurement has not been disclosed. But if the finalized version were to adopt the Sesame Credit’s (the pilot developed by the Alibaba Group) algorithm, then the score would be rated between 350 and 950 points and use the 5 criteria: Credit History, Behaviour & Preferences, Fulfilment Capacity, Identity/Personal Characteristics and Social Presence/Identity.

Credit History – Assessment of payment histories, credit card status, indebtedness, utility bill payments, etc.

Behaviour & Preferences – Individual’s online behavior, the type of websites visited, duration of online activity, purchasing tendencies.

Fulfillment Capacity – extent to which a contract or formal obligation is honored, eg; tax payments, rental contracts, loans, etc.

Identity Characteristics – personal information, eg; occupation, home address and education level.

Social Presence/Identity – evaluate the type of online influence or presence exhibited, the credit rating of friends within the social circle.

These definitions of the criteria are rather simplified yet consists of the essential principles.

Rewards to the Trustworthy, Punishments to the Discredited
In the 2020 version of the credit system, China will have an arsenal of rewards and punishments at their disposal, given the government’s power. The rewards and punishments will be relative to the credit score; hence both will become greater in intensity as the credit score goes to either end of the spectrum.

So far punishments have hinted at banning individuals from air-travel, restricting from SOE (state owned enterprise) management positions and even lower level positions, slowing down internet speed, restricting from enrolling children into esteemed schools, builds red flags in your profile as an untrustworthy individual, which creates problems when attempting for bank loans and other grants and even naming and shaming blacklisted individuals, by posting their details online.

Rewards mostly consist of easing a person’s daily life, such as by offering cheaper and more public services, free gym memberships, and overall less bureaucracy.

A Little Bit of Drama
Hearing about this system tends to make most people cringe, especially if they have seen the Black Mirror episode ‘Nose Dive’. Where the very ambitious protagonist ‘Lacie’, practices her fake smile along with the rest of her constructed persona daily in-order to climb up the social ladder. Because to Lacie, that’s the difference between getting her dream apartment and living her best life and becoming an antisocial truckdriver.

In today’s world of hard views and denial of facts, how comfortable are you with voicing your sincere opinion to your peers?

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