China Law Translate’s ‘Giving Credit’ series considers social credit in China through review of the provincial-level Social Credit Regulations that have been released so far and other primary sources. Previous articles have looked closely at rewards and punishments involved with social credit, and this article takes a step back to look more broadly at the concept of social credit, and what information is included.
Each of the four local social credit Regulations defines Social Credit Information as information useful for understanding a subject’s (ie a person or organization’s) compliance with laws, regulations, and contractual obligations.
This definition might seem like an empty bit of legalese, but it contains a critical point. It tells us that the focus of Social Credit is compliance with legal obligations, which roots the system in existing laws. The 2014-2020 social credit plan, and some of the local Regulations, also contain broad language discussing the construction of a ‘culture of creditworthiness’ and ‘moral education’, which has led many to fear that social credit will regulate and restrict behavior beyond the requirements of law. Here the rules show that when it comes to actual function, Social Credit’s core concern is strictly with legal obligations.
The understanding of ‘credit’ is thus narrower than many fear, but is still a broader concept than may be familiar elsewhere. Credit usually refers to someone’s fitness to receive loans- it predicts the likelihood of their making timely payments. Repayment of loans is compliance with a contractual obligation, which is a legal obligation, so is certainly a key part of Social Credit information — but the social credit apparatus also hopes to assess reliability in other areas.
This is accomplished by keeping detailed archives of legal violations in various areas. If a company receives a health code violation at its restaurant or violates the terms of construction permits- this is considered credit information because it shows failure to comply with law. The company and the directly responsible individuals might face heightened scrutiny when applying for new permits or opening new restaurants. If a citizen is caught forging a train ticket- this is also credit information showing non-compliance with the law.
The social credit apparatus is going to integrate information by regulating data exchanges and information sharing between different regions and departments, with much of it made public. That doesn’t mean that the information will somehow be crafted into a unified score; mainly because that wouldn’t be terribly useful to anyone.
If you go to a new restaurant, you might be interested in knowing what health code violations have occurred there- or just seeing a health code grade hung to the wall. You are probably less interested in knowing that the owner or chef recently forged a train ticket. Banks are similarly unlikely to be too concerned about your failure to sort your recycling when they consider making a loan, even if they have access to such information.
This is why the social credit apparatus works primarily through industry-specific regulation, and blacklists for serious misconduct. Private credit investigation and services companies are also being encouraged to develop diverse credit products that process information to meet the needs of diverse groups. It may be that someday their big data analysis demonstrates that train ticket fraud reliably predicts health violations, or that non-recyclers always make late payments, but until then, unified scores aren’t likely to be terrible prominent except as publicity stunts.
Social Credit Information includes both public and market credit information:
Public Credit information is information produced or acquired in the performance of government functions by state organs or legally authorized organizations. It includes things like fines, warnings, citations, punishments, court orders, and also professional qualifications, business licenses, official approvals, commendations and so forth.
Market Credit Information is information generated by businesses, organizations, or credit services and credit investigation bodies that might provide some insight into the subjects’ compliance with legal obligations. This could be raw information, or it could be a privately created ‘score’ or assessment generated in reliance on public or market credit information items.[Table 1 below collects the definition provisions from each of the local Regulations]
Information on natural persons’ religious faith, genetics, fingerprints, blood type, illnesses or medical history must not be collected as either public or market credit information. I put this first because it shows limits to the scope of Social Credit Information. The government may well have some of this information on file for its citizens, but it is not to be considered in evaluating ‘credit’ no matter how useful it is for predicting compliance with legal obligations.
Other information may require the informed written consent of its subject before it may be collected. Shanghai and Hebei both have such rules for information including income, savings, negotiable securities, commercial insurance, and real estate; as well as information on taxes paid.
Public Credit information
Public credit information is an expansive, but finite, set of information. Each region has procedures for creating a detailed catalog of individual Public Credit Information items that may be included.
The organization of the catalogs varies significantly from region to region, but the following information is generally provided for each item in the catalog:
- The unit providing the information.
- The type of information: [Shanghai breaks down as: Credentials, Supervision (punishments and rewards), and Registration information, enforcement information, utility contract information, judgment information, and public interest activity information.]
- A catalog item number for the information
- A description of the information
- The period the information will remain valid and accessible to inquiries.
- Whether the information is public or requires authorization by the subject of the information before being disclosed. (some include a third category of information that can be shared between departments, but not publicly e.g. Hangzhou)
- Whether it applies to legal persons (corporations) or natural persons.
- Whether the item is negative information.
Where a proposed item for inclusion in the catalog is likely to be controversial, impact rights, or have a major impact on the public, an assessment is to be carried out before deciding whether to include it. Moreover, the public information catalogs are also to be disclosed for public comment before their adoption.[i]
Many cities and provinces that have not yet adopted Social credit Regulations have already adopted measures on the management of public credit information and Public Credit Information Catalogs. A comprehensive review of these is beyond the scope of this article as they are thousands of items long, but looking into emerging norms would be make an excellent research project as a huge number of examples can be found online. Sample items from a few of these catalogs have been included as table 2, for comparison purposes.
Market credit information
In addition to the more absolute prohibitions and consent requirements mentioned above, which apply to both market and public credit information, consent is required before any individuals’ market credit information is collected, absent a legal exception. [ii] Hubei and Hebei require that the intended uses also be agreed upon. Shanghai and Hebei both encourage information subjects to make voluntary disclosures of information and ensure that existing information is accurate and complete.
Market credit information can include information that enterprises, industry associations, or other organizations create themselves, but also information they collect which is necessary for management and service functions. The scope of permissible data collection seems to vary a bit by region. Hubei specifies that only businesses are ‘encouraged’ to record information they produce themselves, while industry associations alone are ‘encouraged ‘ to record members’ credit information and create member credit archives and databases. Hebei similarly distinguishes between businesses and industry associations, but includes platform enterprises (like online marketplaces) as groups that may collect member (hosted merchant) information. In Hebei however, the scope of target information subjects for is reduced as to associations as it considers ‘member enterprises’ , possibly moving away from individual practitioners. Shanghai has the broadest rule, allowing that businesses, associations, and public institutions may all collect what they produce themselves or member information needed for management or services.
[i] Shanghai 10, Hebei 11, Hubei 9, Zhejiang 13. [Hubei’s phrasing is the most unique, and may only require public solicitation of comments where there is controverys
[ii] Shanghai 14, Hubei 17, Hebei 16