China’s Social Credit System

On 14 June 2014, the State Council of the People’s Republic of China published its “Planning Outline for the Construction of a Social Credit System” with the objective of elevating “the sincerity and quality of the entire nation” and building “a harmonious socialist society”. Individual databases would be implemented to save personal financial and administrative data, but also information about traffic violations, neighbourly behaviour, and social media activities in order to ultimately produce an individualized number: the publicly visible social coefficients of every Chinese citizen.

Since then, China’s attempt to construct a nationwide “social credit system” has been written about in detail. The general thrust has been that the state, with the active assistance of digital corporations, is installing a nationwide system of total surveillance. In 2018, the German newspaper Frankfurter Allgemeiner Zeitung described the project as “the greatest attempt at digitalized social control of all time.” A document published last year by Germany’s Federal Agency for Civic Education declared that “China’s Communist Party aspires to monitor Chinese citizens completely and abolish any private sphere. This is characteristic of fascist states”. And on the occasion of the Chinese Communist Party’s twentieth National Congress, German paper Süddeutsche Zeitung published an article with a title that translates as “Kneel Down”, which stated that “Xi [Jinping has] reinvented the authoritarian states as a digital dictatorship. … Surveillance is total.”

Other observers, such as the reputable Merics Institute, paint a very different picture. A recent study by the Berlin-based think tank argues that no such nationwide surveillance system exists and that the project’s objectives lie elsewhere: monitoring the everyday lives of individual people is not its top priority and its goals are quite diverse. Historian Chenchen Zhang of Queen’s University in Belfast identifies “financial credit, the implementation of judicial rulings, commercial reliability, social reliability, and the integrity of the government”. Experts of various stripes also point out the conceptual difficulties, fragmentation of test runs, and limited usage scenarios that relate to such systems.

Background and Implementation

The idea for such a system first arose in 1999: Zhu Rongji, Chinese premier at the time, commissioned a research team from the Institute of World Economics and Politics at the Chinese Academy of Sciences to find solutions for corrupt market behaviour. In response, the team proposed the centralized National Credit Management System, which was to collect data from all across China.

In 2002, Chinese president Jiang Zemin announced the system in a public speech following initial experiments. Implementation began in 2014, beginning with an early overall plan and followed by plans for the individual provinces.

That same year, it was announced that by 2020, each citizen and every business would receive a unique, nationally recognized ID and score. The score would indicate its holder’s financial and economic reliability, but would also be influenced by social behaviour and political loyalty.

While surveillance, censorship, and the suppression of opposing opinions do undoubtedly occur in China, the social credit system is primarily aimed at fulfilling objectives other than monitoring or even re-educating the Chinese populace.

The system’s primary goal is to ensure greater security and reliability in social life. In the absence of a pre-existing corresponding economic tradition in China, the social credit score indicates a potential business party’s trustworthiness. There are over 50 million businesses in China, ranging from mega-corporations to backyard businesses, and all of them want to conduct transactions (often facilitated by platforms like Alibaba and Taobao) with the 1.4 billion people in China. However, there is essentially no long-standing tradition of institutions that deal with trust-building.

The first thing that needed to be done was to build the infrastructure and institutions to fill that gap, with the Internet + Supervision platform leading the way. It acts as the technical database for China’s social credit system (CSCS) for businesses. “The assessment outcomes of the social credit system for businesses, like the national platform for exchange of credit information, are captured and combined with non-governmental data about a company’s capability.” This is an “essential component of China’s effort to construct a ‘digital government’”, according to an assessment from Sinolytics, a European consulting firm. This makes it possible, for example, to calculate who will need to factor in inspections and how often they will need to do so.

In addition, China lacks a traditional banking set-up. Private bank accounts were all but unheard-of until very recently. Since online trade has been booming in China in recent years, fraud, failure to pay, and tanked credit have also run rampant. According to the People’s Bank of China, nearly 500 million people applied for loans in 2006 and there was no credit information available about them.

The newly established Credit Reference Center is intended to fix that. It is designed on an American model and intended to provide credit reports based on information from banks and state institutions. The Hong Kong-based South China Morning Post reports that by June 2019, the system had collected data on 990 million people as well as almost 26 million companies and other institutions.

China is not only a developing country with respect to banking. For one thing, it is also attempting to use this initiative to catch up to Western institutions with respect to social scoring. Scoring is not exclusive to China and it is not a novelty of the digitalized age.

For instance, the Association for the Protection of General Credit Security (SCHUFA) has been doing just that in Germany for decades: it calculates individual coefficients that indicate a degree of credit for participants in monetary transactions in Germany. The resulting score is then available to banks, potential landlords, and mobile phone companies. Without a good SCHUFA score (or the similar FICO score in the United States), it is difficult to buy a house, rent an apartment, take out a loan, or sign a mobile contract.

SCHUFA and similar credit assessment systems have a significant impact on individual freedom and have been criticized for years, particularly given that the processes for calculating scores are regarded as industrial secrets.

A Popular Move

It may be surprising from a Western perspective, but given the corruption and fraudulent business practices in China, the system — or the multitude of systems — involved in social scoring are regarded as a welcome attempt to improve quality standards.

In a study published in 2018, the Merics Institute came to the conclusion that these systems enjoy a high degree of public approval: “Educated and wealthy urban Chinese have an overwhelmingly positive view of commercial and government-run systems that rate the ‘trustworthiness’ of citizens, businesses and social organizations. Rather than perceiving them as instruments of surveillance, they see them as a way to protect consumers from food scandals or financial fraud — and to access benefits connected to a high social credit score.”

With big data, China is currently attempting to solve all possible problems — and in the process, it is revealing a dangerous faith in the liberating power of technology.

The system is seen more as a combination of Germany’s automotive inspection association, TÜV, ratings systems like the ones used in the platform economy, and measures taken to build trust in companies and institutions, which are mentioned in the same breath as the campaign to strengthen users’ rights in the digital field.

As Zak Dychtwald has impressively described, most Chinese people — particularly those who are young and tech-savvy, speak English, and consume foreign media and cultural products — are well aware that they are being watched, that mass media are censored, and that critical debates are being suppressed. Here, as well, it is apparent that Chinese people are concerned with things other than being surveilled and bossed around. The study concludes that, for them, it is more important to conform with the still-reliable central government in its fight against (regional and local) corruption and fraud.

China’s Brand of Technological Solutionism

While surveillance, censorship, and the suppression of opposing opinions do undoubtedly occur in China, the social credit system is primarily aimed at fulfilling objectives other than monitoring or even re-educating the Chinese populace. Instead, it is focused on increasing trustworthiness in business, implementing market regulations, and taking steps toward digitalizing management. Seen in such a light, it can be regarded as another attempt at playing institutional catch-up, and its most powerful impetus is a historical context in which trust-building institutions have been lacking and the rule of law has been weak amid explosively growing business activities.

What is particular about China’s system is its sheer scale and breadth as well as a universal over-arching governance strategy and orientation with respect to gathering and using big data, as Australian lawyer and regulation specialist Drew Donnelly writes.

There is no question that China leads the world both in the economically relevant application of big data, primarily by major digital corporations, and in its use for social monitoring and organization. Containing the COVID-19 pandemic and organizing the Zero-Covid policy — with its large-scale lockdowns aided by digital systems — were both impressive indicators of how important digital technologies have become for everyday governance.

In mid-November, Chinese authorities also proposed a joint bill aimed at consolidating existing points systems that had previously operated in isolation. There have been specific discussions about a centralized credit reporting system and uniform social credit numbers.

The outlines of a specifically Chinese technological solutionism — meaning the conviction that social problems can be managed with the help of digital technologies — are becoming apparent. In any event, that is the opinion of David Bandurski, co-director of the China Media Project based at the University of Hong Kong. He writes: “With big data, China is currently attempting to solve all possible problems — and in the process, it is revealing a dangerous faith in the liberating power of technology.” The Chinese variant of technological solutionism is becoming visible in the social credit system, which could also give China a headache in the future — particularly if there is no extensive public debate about big data experiments and policies.