China’s Upcoming Social Credit System

Establishing Trust in China in the 21st Century

In the Chinese culture, trust has traditionally grown out of time-consuming efforts of establishing personal relationships. In the modern world the Chinese tradition can be inefficient. In the developed world, credit rating systems for finance have been instituted. The Chinese government hopes to make social interactions more efficient through its Social Credit System. In 2014 the government outlined a plan to develop the Social Credit System by 2020. The system will apply to Chinese citizens and possibly both foreign and domestic businesses. Supporters of the plan see it as a means of improving trust in society; critics call it another power grab by the authoritarian regime.

How It Would Work

The execution of the plan is vague, but there are outlined judgment criteria and punishments for failing to maintain an acceptable score.

According to TomorrowNews US scoring would occur across five major categories: financial credit history, contract obligation, personal characteristics, behavior and preferences, and interpersonal relationships. While developed countries have established methods of tracking financial credit history, the other categories have not been formalized in any universally accepted system (One example of behavioral rating in the West is the Uber rider rating that all users have: a low rating may prevent a user from getting a ride quickly.).

Having a low credit score could result in the following consequences: slower internet speeds; denial of access to certain restaurants, night clubs, and golf courses; travel restrictions; denial in rental, insurance, and loan applications; and loss of social security benefits.

Current Solutions Could Serve as a Model

 

Sesame Credit

The government’s system has not been implemented yet, but this has not stopped other companies from developing credit systems on their technology platforms. The most widely used credit system is Sesame Credit, developed by AliPay for its platform. While Sesame Credit is currently mostly a loyalty rewards tool for its users, it might provide a template for the government’s system. Like the proposed government system, there are different categories that comprise the credit score of Sesame Credit: purchases using AliPay; personal information submitted including email, degrees obtained, and property-ownership certificates; timely payment of bills and credit cards; and the number of friends and social interactions within AliPay. Benefits of a higher Sesame Credit score include deals and discounts through AliPay.

 

Reactions in China

The Chinese citizens have had mixed reactions to the idea of a government-run social credit system. Citizens in Shanghai on the whole were fairly enthusiastic for a social credit system that could enrich trust among citizens, particularly where economic transactions are concerned. Concerns include protection of data from criminals, transparency and objectivity in the rating process, an individual’s score dependent on the scores of his social network, and lack of freedom to purchase items that might be considered “knock-off” or sold through a “gray market”, or the degree to which the government might decide what behavior is socially acceptable.

Looking Forward

It remains to be seen whether the government can implement the envisioned system by its self-imposed 2020 deadline. The plan shows no signs of slowing down though. Time will tell whether or not this system resembles an Orwellian society or simply a more efficient means of establishing trust among Chinese citizens (and possibly foreign businesses) in the 21st century.

 

John Broussard, MBA Candidate 2018