Blacklists… data… credit scores… all sensationalized elements of the Chinese policy plan regularly blasted as reminiscent of 1984: the Social Credit System. Often compared with chilling dystopian science-fiction episodes, the topic has received breathless coverage from some members of the international media, but information is often inconsistent or saturated with alarmism. On the other hand, Chinese officials tout it as a policy that expands financial services and improves law enforcement, a position often met with skepticism due to the authorities’ lack of transparency.
Making sense of “Social Credit System” and the reality of the policy in China can therefore be a challenge. In light of this, here’s some of the nitty gritty on what the project actually is.
Simply put, China’s Social Credit System (SCS) is a policy project that aims to incentivize lawful, honest behavior and expand financial services. China’s State Council introduced an outline of the policy plan in 2014 that stretches through 2020.
The term “Social Credit System” is problematic for various reasons. One, it makes the policy plan sound like a singular, coherent entity, when really it’s a “hodgepodge of public administration and legal reform initiatives”, as Ocean University of China associate professor Xin Dai puts it in his award-winning paper on the topic.
In the paper, Xin Dai addresses the policy as the “Social Credit System Project”, tacking on “Project” to allow for a more accurate understanding of the policy as housing multiple, disconnected initiatives.
Another problem is that the translated English term “social credit” is “desperately misleading”, as Jeremy Daum, senior research scholar at Yale Law School’s Paul Tsai China Center and founder of China Law Translate, put it when speaking to RADII about the policy.
“The Chinese phrase 社会信用 Shehui Xinyong, which would translate as ‘social credit’ could also have been translated as ‘public trust’,” says Daum. “There’s a lot of ways it could have been translated; it has a lot of meaning beyond what the phrase ‘social credit’ suggests to English speaking ears.”
Given these linguistic difficulties, it’s easy to understand why some would confuse and conflate various components of the project, which has happened in various instances of coverage.
To better understand the functions and goals of the system, Daum says it can be boiled down into three essential components: financial, regulatory and educational.
The educational component involves generally teaching people about finances and the credit economy, and encouraging morality and trustworthiness, Daum says.
The two aspects this article will focus on — the financial and the regulatory — are often mistaken as making up the entirety of the SCS, or are conflated. In reality, though these components exist under the same “social credit” umbrella, they function quite independently and should be viewed as separate initiatives.
The financial component, in large part, seeks to expand financial services in a country where much of the population lacks a credit history. To do this, in 2015 The People’s Bank of China (PBOC) authorized eight companies to begin working on their own, private consumer credit systems.
Initially, the PBOC planned to issue formal licenses to the companies after six months — but that never happened. Their reasoning was that the systems had inherent conflicts of interest and were, essentially, poor credit-raters. This didn’t mean every existing service was cancelled however.
Despite not receiving a license, one system remained in use — one that has garnered the attention, fascination, and alarm of the foreign media for the past couple of years: Sesame Credit.
(Side note: One that actually was cancelled by the PBOC in February last year, WeChat’s credit scoring system, was recently relaunched within WeChat Pay. The private system bears many similarities to Sesame Credit and is currently being tested in select Chinese cities.)
Launched on January 28, 2015, Alibaba affiliate Sesame Credit functions within the digital payment app Alipay on an opt-in basis. Once in use, the service aggregates users’ data from a variety of platforms in the Alibaba network to produce a three digit credit score.
The credit score ranges from 350 to 950, with a starting score of 600. A high score affords users perks and benefits such as skipping security at the airport or waiving deposits for bike-sharing services. A low score has no negative consequences.
Many in the media mistake Sesame Credit’s private, third party service for being the Chinese government’s entire SCS. In the past, reports have variously claimed that the system is mandatory, government-run, and that every citizen will soon be scored based on all aspects of their life. But the reality at present is that the effect of one’s Sesame Credit score is entirely confined to whether one does or does not receive perks on partnering services.
Also, some experts say it’s unlikely the government will even use the data collected by Sesame Credit for any sort of mass data analysis.
“Does the Chinese government want all of the data from Alipay’s purchases? What would they do with it?,” asks Daum rhetorically. “Do they have the capacity to do anything with it? They would have to present some legitimate reason for getting it.”
Dai agrees, emphasizing that the government is “aware of the potential flaws of these private credit rating practices, such as the lack of neutrality or objectivity, and their possible infringement on people’s data privacy and security.”
The regulatory component of the SCS aims to improve law and regulation enforcement through the implementation of various blacklists and a “redlist”, which both individuals and corporations can be placed on.
Almost every administrative agency in the Chinese government has already created their own industry-specific blacklist, each with their own standards for who is put onto it. One example Daum gives is of the food safety blacklist, which subjects blacklisted companies to greater scrutiny and an increased number of inspections.
“The development of blacklists really is just identifying certain people who violated existing laws and regulations,” says Daum, “and the documents say that these blacklists are to be designed on the foundation of existing regulations.”
The most well known blacklist — perhaps the blacklist — is the Chinese courts’ defaulters list. To end up on this list one must fail to meet an obligation they owe for a given offense — not paying a set fine, for instance — at which point a court judgment will be issued against them.
Penalties for being placed on this list span various industries, ranging from not being able to fly or book tickets on high-speed trains, to not being able to send your children to private school. The main goal of these penalties is to coerce the defaulter into fulfilling the owed obligation, at which point they are taken off the list.
Again, like Sesame Credit, the foreign media sometimes conflates this initiative with the entire SCS. Other times they conflate it with Sesame Credit’s scoring system, claiming that citizens are placed on this defaulters blacklist for having low Sesame Credit scores.
While there are natural concerns about the potential for all of these data streams to become linked, in reality this is an independent initiative housed within the SCS project. The information on blacklisted citizens is available to view on a government website, but data on their conduct is not aggregated to create any sort of “citizen score”.
On the other end of the spectrum is the redlist, which includes those recognized for exemplary behavior. Typically firms are the ones included on this list, says Dai.
“Many government agencies have long had the practice of issuing various sorts of prizes and awards to firms within their jurisdiction for good performance in complying with their regulatory requirements,” says Dai. “So typically receiving those awards is certainly something that can get you onto a red list.”
Dai and Daum both emphasize that while concerns surrounding data privacy are legitimate, as are worries over the potential for the various strands to one day be connected, the present SCS project isn’t quite as sinister as many in the media make it out to be. In many ways, it’s attempting to solve real problems in China.
“In reality, I think the SCSP by far is still largely a response to the very basic, practical difficulty in governing a large and complex country like China,” says Dai. “Many laws and regulations are simply under-enforced by a significant measure.”
Some experts have made connections between policies bound up in the SCS project and laws in the U.S. In Xin Dai’s paper, for instance, he points out that public reputation lists also exist in the U.S, giving the sex offender’s list as one example.
China Law and Policy founder and New York City attorney Elizabeth M. Lynch also made connections between the two in a recent interview with Dr. Daum, drawing comparisons between the SCS and various aspects of New York State law, such as the revocation of an individual’s driver’s license when their state debt exceeds a certain amount.
Daum says he believes the fascination many have with the SCS, particularly in the U.S., is embedded in their cultural psyche. Shows such as Black Mirror and other cultural objects popularized the idea of being rated on everything, then China introduced a system with a name that fit the idea.
“A black mirror is still a mirror”, Daum says. “We’re seeing ourselves in this and that’s why it’s interesting to us.”
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