In China, Social Credit Determines Trust


An in-depth look into the mechanisms and effects of China’s social credit system.


When considering the fundamental elements upon which individuals operate in society, whether it be on a personal or institutional level, the element of trust emerges as paramount. The degree of trust bestowed on friends, family, corporations and state institutions to act in good faith determines individuals’ actions and ethical considerations. In many democracies, trust is leveraged as an economic tool, taking the form of credit scores (as in the US) or similar systems of measurement. One’s credit score, indicating the likelihood of that individual paying credit back, is calculated through the amalgamation of that individual’s credit history, producing a single, easily comparable, quantifiable metric through which financial institutions can evaluate trustworthiness. But what happens when that credit history is inaccessible, unrecorded or incomplete? How can institutions measure trust?

Towards a Trust Metric in China

In China, many citizens do not have bank accounts or any record of credit history. A lack of a centralized credit database means debtors are not effectively held accountable for defaulting on loans and consequently, financial institutions are more hesitant to issue loans. As a result, there has been weakened trust in institutions, corporations and individuals, which in turn has hampered the full potential of economic growth in the country.

The Chinese government has decided to address this problem by deducing financial trustworthiness through a different measure; one more comprehensive than most contemporary conceptions of a credit scores. China has decided to pursue a social credit score, calculated using a two-pronged approach. First, the Chinese government will collect data about individuals aided by private organizations and branches under its authority. The data collected will include information surrounding goods and services purchased on and off-line, finances and propensity to repay loans, social media activities and the people an individual choses to associate with, any available credit history, legal matters, and health records. Further, China will collect data on individuals using a more explicitly intrusive approach, including gathering images from the extensive network of surveillance cameras with facial recognition capabilities. Moreover, the government will assign designated watchers for neighborhoods to assess citizens’ public disobediences, such as; speeding, DUIs, smoking in non-smoking areas and walking dogs without leashes.

Functionality of the Social Credit System

With access to data from private firms and from their own collection methods, the government assigns a negative or positive value to each action. Every citizen starts with 1000 points under the social credit system with the score fluctuating as the person operates in their life; failing to pick up your dog’s remains may result in a slight point deduction, while donating to charity may augment one’s total score. Notably, Xi Jinping’s government has access to data provided by Alibaba, which essentially functions as the Chinese equivalent to Amazon. Certain purchases tracked on Alibaba will garner points for a person while others may detract from their score depending on their value; e.g. buying diapers is an indicator of responsible parenting and elevates one’s score, while buying video games may be interpreted as a sign of laziness and would reduce total score, effectively disincentivizing such purchases.

Letter grades correspond to certain point intervals, with privileges or restrictions placed on those who fall within those intervals. A higher score merits discounts at stores, reductions on bills, broader free access to cable, invitations to exclusive community events, better matches on dating sites, the capacity to rent goods without placing a deposit and better interest rates at banks. However, if an individual falls under a certain echelon, they may be placed on the “Blacklist”, essentially a registry of untrustworthy citizens. For those who find themselves on the blacklist, restrictions are placed on how they may operate in society. Some may lose eligibility for promotions in the workplace (regardless of performance), be barred from high-end consumption, have their face displayed on billboards noting that they are “untrustworthy”, or have a warning message broadcasted to people calling their phone to inform the caller that they are untrustworthy. One may also be prevented from using high-speed transportation, have reduced internet speeds, be prohibited from attending highly ranked schools or have a pet confiscated.

In Hong Kong a social credit system will go live in May 2019. A nationwide roll-out is expected 2020. Photo: Unsplash

Current Scope and Moves Forward

The plan for this form of social credit score was announced in 2014, and has been present in some pilot test cities, such as Rongcheng. Moreover, private pilots championed by financial firms such as Sesame Credit have also been running for a number of years. The Blacklist has already been implemented by Jinping’s government as a consequence for debtors who have continually defaulted on their loans. Currently, members of the blacklist face many of the restrictions listed prior, and also cannot qualify for loans or access credit cards. Even if a debtor has repaid their loans, it is does not signify that they may be removed from the blacklist. A nation-wide social credit system is projected to be implemented by 2020.

Broad Consequences

The economic implications of China’s social credit policy reflect the original goals of the program. With the implementation of such a system, a greater level of trust is fostered between citizens, financial institutions, corporations and the government. This serves to reduce risks of moral hazard and in turn facilitates investment, as all agents operate with a greater level of certainty and a smaller informational asymmetry between actors. Increased trust will, in theory, stimulate investment and ultimately bolster economic growth in the country. Meanwhile, the consequences for those that have a low score or have been Blacklisted are grave. These citizens would be systematically excluded from participating in numerous facets of the evolving economy and would not reap the benefits of increased economic prosperity. Financial opulence for the country at large does not translate to the well-being of all.

Social credits are different from other pre-existing networks of data collection, they can and will have sweeping consequences on the individual’s relationship with the state, and relationships between individuals. A report issued by the Mercator Institute for China Studies determined that, even should the system fail to be brought to fruition in the manner currently proposed, that the “scope of this project is massive and will transform China’s legal, social, and economic environment significantly.”. On one hand, the public support for the system remains strong; in a survey conducted by the Mercator Institute, it was found that 80% of the Chinese public somewhat supports or strongly supports the project. The social credit system would serve to increase social accountability, awareness and responsibility among citizens. Further, it would broaden trust between citizens and corporations, which would also be subject to the scrutiny of the social credit system. After such scandals as the milk scare in China in 2008, which effectively caused irreparable illness to more than 300000 Chinese children, trust has been degraded between consumers and corporations in China, and a measure of trust such as the social credit system is thus sought after and supported by many.

On the contrary, little protection for citizens and limited transparency of the extent of the data pulled from private firms is worrisome for many, including Human Rights Watch, who label the program as “chilling”. The social credit system effectively bolsters Xi Jinping & Co.’s control over the actions of its citizens, for instance, posting what may be deemed to be “fake news” by the regime online is punishable. For many westerners, such censorship of dissidence, control of public action and constant oversight may be seen as Orwellian and an indicator of a totalitarian regime. It is important to bear in mind that our viewpoints are inherently biased based on the liberal democratic systems that have shaped our thinking and our values. That considered, how far can we extend moral relativism? Totalitarian shifts tend to take place through a series of actions degrading privacy and liberty; when emotions such as anger and sadness are a social handicap and are systemically stigmatized, a person’s full emotional capability is necessarily limited. When we live in fear of being fully expressive, do we really live in a regime that serves the best interests of its citizens? To what extent does the systematic dismantling of privacy justify increased trust?


References

[1] Cardiff Garcia, and Stacey Vanek Smith. #871: Blacklisted In China : NPR. 26 Oct. 2018, https://www.npr.org/templates/transcript/transcript.php?storyId=661151404.

[2] Marr, Bernard. “Chinese Social Credit Score: Utopian Big Data Bliss Or Black Mirror On Steroids?” Forbes, https://www.forbes.com/sites/bernardmarr/2019/01/21/chinese-social-credit-score-utopian-big-data-bliss-or-black-mirror-on-steroids/. Accessed 25 Feb. 2019.

[3] Cardiff Garcia, and Stacey Vanek Smith.

[4] Cardiff Garcia, and Vanek Smith Stacey. “China’s Social Credit System.” NPR.Org, 10 Sept. 2018, https://www.npr.org/templates/transcript/transcript.php?storyId=655914994.

[5] Ibid

[6] Marr, Bernard

[7] Ma, Alexandra. “China has started ranking citizens with a creepy ‘social credit’ system — here’s what you can do wrong, and the embarrassing, demeaning ways they can punish you.” Business Insider, 29 Oct. 2018, https://www.businessinsider.es/china-social-credit-system-punishments-and-rewards-explained-2018-4.

[8] Cardiff Garcia, and Vanek Smith Stacey

[9] Kobie, Nicole. “The Complicated Truth about China’s Social Credit System.” Wired UK, Jan. 2019. www.wired.co.uk, https://www.wired.co.uk/article/china-social-credit-system-explained.

[10] Ibid

[11] Genia Kostka. China’s Social Credit Systems Are Highly Popular – for Now | Mercator Institute for China Studies. 17 Sept. 2018, https://www.merics.org/en/blog/chinas-social-credit-systems-are-highly-popular-now.

[12] ibid

[13] Huang, Echo. “The Lasting Legacy of China’s 2008 Baby-Formula Disaster.” Quartz, 16 July 2018, https://qz.com/1323471/ten-years-after-chinas-melamine-laced-infant-milk-tragedy-deep-distrust-remains/.

[14] Wang, Maya. “China’s Chilling ‘Social Credit’ Blacklist.” Human Rights Watch, 12 Dec. 2017, https://www.hrw.org/news/2017/12/12/chinas-chilling-social-credit-blacklist.

Featured Image: Unsplash

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