WIRED magazine recently described China’s ‘social credit’ plan as a social ranking system creating ‘three digits that dictate your place in society’. Others have compared it to an episode of Black Mirror where citizens constantly rate each other to devastating effect. None of these descriptions hits the mark, and the reality may be much worse.
Social credit is best understood as part of China’s growing surveillance apparatus. Like the cameras that now line every street and alley in Beijing, social credit adds something to security at the expense of privacy. Just as the cameras monitor our physical activity using AI and facial recognition, social credit is about using real-name registration systems and big data management to create records of our digital conduct. All aspects of our lives – transactional, educational, medical, legal, recreational, and consumer- leave a digital footprint, and social credit is about integrating and mobilizing that data to increase social and economic stability. Of course, it is the Party-State that maintains and mediates access to this data.
China’s Social Credit Plans aren’t secret. An outline for progress through 2020 was released in 2014 laying out broad premises and mechanisms, and an enormous wave of implementing rules and regulations has since followed. Social credit and related information systems were also a major component of a Party-State document on increasing public security. This article and others on this site, draws on such primary sources to add clarity to the discussion of social credit.
By way of a linguistic side-note before going forward, the phrase Social Credit may suggest something different in English than in Chinese. It is a literal translation, but may overemphasize interpersonal connections. Consider ‘social media’, ‘feeling social’ and other such uses, while 社会，the ‘social’ in social credit can also mean society or the public in different contexts.
As an example of a similar type of confusion that can result, 社会资本 literally ‘social capital’ does not share the English meaning of ‘ networks of relationships among people who live and work in a particular society creating economic value and enabling that society to function effectively.’ Instead it is often used to simply mean capital that was invested by members of the general public.
What’s the relationship of Social Credit to ‘Sesame Credit’?
If you carefully read foreign coverage of Social Credit in China, you may notice that it either outright conflates or blurs the line between Social Credit and a number of private programs- especially Sesame Credit.
Social credit is the Chinese’ Party-State’s shorthand for a broad range of efforts to improve market security and public safety by increasing integrity and mutual trust in society.
It seeks to accomplish this by using four basic tactics:
- Aggregating and integrating information within and across geographic regions and professional fields.
- Creating measures to incentivize ‘trustworthy’ conduct, and punish ‘untrustworthy’ conduct.
- Increasing reliance on credit evaluations in transactions, employment, and so forth.
- Using the above mechanisms and moral education to foster a trusting environment.
This is a big idea, and more of a policy or ideology of data use than a single project or system. It will impact entities and individuals in all fields, which are often broken down into four major groups by the relevant legal documents, each with their own emphasis:
- Government Affairs: Emphasizing government transparency, public supervision etc. to increase government integrity and fight corruption.
- Commercial Enterprise: Primarily publishing records of corporate violations of existing industry regulations or laws to guide consumer reliance and increase deterrence.
- Social Organizations and Welfare: Emphasizing preventing fraud, public use of credit.
- Justice Sector- Seeking to improve credibility by increasing transparency and taking a hard line on corruption.
One of social credit’s many goals is fostering the development of private financial credit investigation and credit service businesses, which can innovate to provide new financial credit products and applications. This fits the goals of increasing public use of credit services, and of regulating the credit services market itself.
The idea is that these businesses would be able to expand the credit service industry to include the big chunk of China’s population that has no profile in the banks’ own financial credit system because they have never borrowed money, invested, or accumulated savings. They might do so by considering alternative sources of information such as online conduct – an idea that has been floated outside of China as well.
In pursuit of this goal, the People’s Bank of China (PBOC) authorized eight businesses to experiment with individual credit reporting, one of which was Sesame Credit!
All of these pilot businesses have so far been denied licenses by the PBOC to operate as personal credit investigation companies. This is mainly because their systems have fundamental conflicts of interests, but also because they aren’t terribly useful indicators of creditworthiness.
Sesame Credit is a product of Ant Financial and within the Alibaba corporate empire. As such it has an enormous amount of merchant and consumer data at its disposal. This includes transaction histories and user reviews from its online sales platforms, and also records of spending via their phone- based payment system. Phone payments online and off are quickly becoming the default in Chinese cities, and Alibaba’s Alipay is one of the major players.
Despite these natural advantages, for the time being, Sesame Credit is better viewed as a Loyalty Rewards Program with fantastic swagger rather than a real credit rating. Members’ scores are based solely on their use of affiliated services and making connections with others in the network [hence the PBOC finding of conflicts of interest]. The benefits of a high score are essentially limited to waiving deposits and receiving discounts or preferential treatment at cooperating businesses like bike rentals and hotels. Enrollment is voluntary and there are no negative consequences of bad Sesame Credit.
If Sesame Credit is to be compared to any government system, it isn’t the massive Social Credit policy, but the banks’ personal rating system that it is meant to help supplement.
Sesame Credit may someday develop into a more reliable credit measure. In a move towards getting the PBOC licensure, sesame credit and the other 7 failed programs have just become equal shareholders in a database of online non-bank lending information. The eight pilot companies will not share their own proprietary data, but will share access to this seemingly independent and objective database of financial information, which will become a core part of their individual credit ratings.
What does the media get wrong and why?
It’s understandable that foreign media has seized on Sesame Credit. First, it’s highly visible. It is integrated with Alibaba products, and expertly promoted as the financial credit rating it aspires to become. Colorful score displays are engaging and accessible.
Second, conflating Sesame Credit and its kin with the broader Social Credit policy described above resonates more with global fears about new applications of information technology. The mobilization of corporate big data is a growing concern to readers outside of China, especially when data is shared with government. The inclusion of data on our friends and associates in evaluating our credit also strikes a nerve as we are becoming increasingly sensitive to the potential of social media to program or gamify our conduct through behaviorist conditioning.
Ultimately, Sesame Credit just isn’t that interesting, and the bigger Social Credit story is drier and harder to report on. To make the Sesame Credit story more compelling, however, reporters have had to really reach. They’ve even presented Sesame Credit’s enrollment slogans “Start My Credit Journey” and “Trust makes it simple” as sinister enticement. One can only imagine how American Express’s “Don’t leave home without it” or Visa’s “Everywhere you want to be’ would be interpreted if they’d come out of China.
The most common misrepresentations are:
- The system will be mandatory by 2020.
Sesame credit and other corporate rewards programs are unlikely to ever be mandatory.
The planning outline for Social Credit covers the years 2014-2020, and in all likelihood, a new plan will be released at the completion of this one.
The current plan calls for the following vague goals to be met by 2020:
- Fundamental laws, regulations, and standards on social credit are essentially established
- A Credit investigation system that covers all of society, and is built on sharing credit information resources is essentially formed
- Credit oversight systems are essentially complete
- The credit services market is doing well.
- Joint incentives and punishment mechanisms are fully effective
2. All Citizens will be given a ‘Citizen Score’:
All citizens, corporations, and other organizations will definitely have information files that follow them, as that is the core of social credit. It is much less clear that there will be a ‘one number to control them all’ universal scoring system.
Social credit documents focus more on information collection, consolidation, and aggregation than scoring. They actually seem to suggest that many different ratings be involved for different uses, including industry-specific regulation, lending, etc. Private credit investigation operations are encouraged to develop ratings that meet the needs of the market.
The media emphasis on a universal score is probably the result of well-deserved vigilance against China’s surveillance ambitions together with confusion about the role of sesame credit and other private credit investigation systems, but terminology issues may to blame as well.
The Social Credit documents do call for ‘a unified social credit code’ but this isn’t a rating. It refers to an identification number for associating all credit information so as to facilitate the compatibility and exchange of information. For humans, this code will be their national identification number; organizations will be assigned a new number under this system.
The authority also mentions building full coverage of social investigation systems, but this is generally about finding ways to provide access to borrowing for those who have little or no credit history to further economic development.
Some regions ARE experimenting with local point systems, but this doesn’t seem to be the norm, or a dedicated component of Social Credit. Even Shanghai, which offers a credit rating app, doesn’t mention such scores in its regional social credit regulations , leading me to believe the app is meant more as an educational promotional device than legitimate regulation.
3. Your score will dictate your place in society.
As mentioned above, social credit absolutely does include rewards and punishments for ‘trustworthy’ and ‘untrustworthy’ conduct. I’ve written previously on what those ‘punishments might look like and the real dangers they may present, so will not go into great detail here, but the primary punishment mechanism is inclusion on blacklists for enterprises violating industry regulations. Inclusion on a blacklist can limit access to certain industries and subject one to heightened regulatory scrutiny.
One blacklist, aimed at individuals and organizations alike, deserves special attention because it is already fully effective, has the most sensational repercussions, and has been incorrectly linked with Sesame Credit in some articles. This is the courts’ list of judgment defaulters.
The list includes those who have a final court judgment against them, have the ability to perform on it, and have failed to do so. Through massive coordination of various government ministries and departments, anyone on the list has restrictions placed on their consumer spending. There are limits on buying airplane tickets, fancier train tickets, private school education, entertainment, and so forth. [If you haven’t before, you should check it out ]
To get on the list, though, there must be an effective court judgment against you. That means you have lost a lawsuit and exhausted or waived all appeals. You must also have failed to perform on the judgment against you and had this failure to perform again documented at court. You can get off the list by performing on the judgment. [We’ve translated the rules here.]
There are a number of problems with this mechanism, including a lack of confidence in China’s courts to give fair judgments (ironically, one of the problems social credit aims to fix). Another is that in an attempt to pierce the corporate veil, when an organization fails to perform on a judgment, some of its leadership is placed on the list along with the entity proper. This might delight those who think corporate leadership often escapes responsibility too easily, but won’t necessarily help enforce judgments if those affected lack authority to make the necessary payments on behalf of the corporation.
Sesame Credit incorporates this publicly available court blacklist into its scoring process, but to link the lists’ penalties in any way to Sesame Credit, as some have done[ii], doesn’t make much sense. A credit company’s consideration of delinquent child support payments in their calculations doesn’t make them responsible for the wage garnishing that might accompany it.
Nothing in the discussion above is meant to suggest that Social Credit isn’t frightening. Like many other parts of China’s surveillance apparatus, it is very frightening. Even as it delivers some safety and security to many Chinese, it is all too clear from watching Xinjiang or other areas of unrest, that these systems can be quickly weaponized for harsh control. They can also be mobilized to identify and undermine individuals without even upsetting the regional ecosystem.
Debate over the appropriate balance between security and liberty is nothing new. While technological and data management innovations have introduced new tools, it can’t surprise anyone to learn where China’s Communist Party draws the line between individual privacy and social stability. If anything, I would have thought that the plan’s faith in market forces and private business, or the efforts at government legitimacy through increasing transparency, would have been more surprising to those outside of China.
This article wasn’t meant to be about China so much as foreign coverage of China. China’s Social Credit is often used as a way of discussing our own situation from a safe distance. This is, of course, also the role that science fiction like “Black Mirror” and Orwell’s 1984 has traditionally played, so it isn’t surprising to see them invoked here as well. We look at exotified foreign nations or speculative futures in order to reflect on our present, but what we take away from it likely says more about us than about the subject of our examination.
This is all fine, but it’s important to also remember that there are two stories worth exploring here; what is actually happening in China and what we fear is happening to ourselves.
- For more of our articles on Social Credit and a detailed list of relevant primary materials please click here or on the links below.
- ;Social Credit Overview Podcast!
- Giving Credit
- Giving Credit 2: Carrots and Sticks
- Giving Credit 3: Inputs and Outputs
- ‘Map’ of the Social Credit Plan 2014-2020
- Who Did China Ban from Flying?
- The Redlists are Coming! The Blacklists are Coming!
- Credible Threat? Taiwan, websites, and social credit
- Audio: Interview with BBC Business Daily.