China's Social Credit System: The Truth

china's social credit system has

preoccupied westerners imagination since

2015.

an interest in it had only increased in

the context of covet vaccine mandates

and other policies related to the

pandemic which are seen to be an

ideological and political import from

china

worse yet china's system is imagined to

be like an episode from the show black

mirror where each citizen has a score

that determines their position in

society

however this has absolutely nothing to

do with reality

the vast majority of information on the

social credit system in the western

world has done more to mystify rather

than elucidate

one of the very first english language

articles on the chinese system which

appeared in late 2015 is very

illustrative here the organization which

repaired the article did not even

operate in china and as it turned out

later and was admitted by the author

himself the article was based on rumors

and speculations as opposed to concrete

analysis or any familiarity with china

and expressed author's own anxieties

about digital oligarchies in the west

however this very approach came to form

the basis and the essence of the

narrative on china's social credit

system in the west

and while western media tend to present

china's system as a dark secret

underbelly of the communist rule as a

matter of fact both the system and the

documents related to it are open to

public scrutiny and instead of being

oppressed and controlled by the system

chinese citizens themselves let their

views be known

western experts who work in this field

even if critical of china and its system

constantly note how the popular

narrative in the west has little

connection to reality

in order to appreciate the complex

reality of china's system it is

important to understand the very meaning

of the phrase social credit system

for one thing the word credit in china

depending on context can mean both

credit and trustworthiness as we will

see later it is much more correct to

translate and understand it precisely a

social trustworthiness system rather

than social credit system

secondly china's social credit system is

understood in the west as a finished

monolithic mechanism of social control

where citizens are ranked and segregated

based on their numerical social credit

rating which is influenced by one's

views and actions and income to

determine their socio-economic status

however in reality it is very difficult

to even call it the system because in

essence it is just a collection of

political and legal guidelines for

solving certain very concrete problems

in chinese society

as such instead of being a unified

monolithic system it encompasses many

different initiatives to solve many

different problems facing chinese

citizens the major source of western

misconception is precisely an inability

to distinguish between these different

initiatives and their different goals

scopes and purposes

but before we delve deeper into what

china's social credit system is let us

begin by asking why it was conceived and

initiated in the first place

after the cultural revolution and mao's

death the communist party led by deng

xio ping initiated the policy of reform

and opening up which among other things

meant that china was becoming a

socialist market economy

the result was an unprecedented economic

growth and an unparalleled pace of

modernization

the processes that took hundreds of

years in the west and the side effects

of which were amortized through

colonialist policy happened in several

decades in china without any help from

the outside

the chinese state had difficulty keeping

up with the space of modernization and

controlling its most pernicious side

effects

even such basic things as enforcement of

the law were lacking due to an

sufficiently developed legal system and

a weak legal state apparatus

this meant for instance that even as

late as last decade market scandals were

almost a daily occurrence in china

illustrated here is 2008 scandal where

babe milk powder was found to be

deliberately contaminated with melamine

which resulted in 300 000 babies getting

sick

similar food vaccine and other product

quality scandals were a constant

occurrence in china

add to that various fraudulent financial

schemes unpaid salaries and loans

restaurant hygiene scandals weighted

contracts and unmet obligations and you

have an enormous problem top that with

the inability of the chinese state to

enforce the law and you have a social

crisis of trust

it is important to realize that instead

of being an omnipotent totalitarian

power the chinese state has been in fact

extremely decentralized ever since the

reform and opening up

there exists very limited cooperation

not only between separate regional

governments but also between separate

governmental institutions in general

among other things what this meant with

regards to the law was that even if a

culprit was found guilty they could

simply refuse to fulfill their legal

obligations and move to another region

without any repercussions

in fact many culprits having their

fraudulent activities dissolved in one

region could simply start over by

setting up in another region

this was also partly a result of the

fact that china lacked even a basic

unified national data sets

separate regions and even separate

governmental institutions used their own

identifiers and constructed their own

data sets so it was not uncommon for

business entities to have close to a

dozen separate ids

the emergence of china's social credit

system was an acknowledgement that

china's judicial system was ill-equipped

to address these issues of market

misconduct the founding document of the

system stated that

only a small portion of such

infringements result in criminal

prosecution and judicial punishment

the majority of contract violations

another untrustworthy phenomena cannot

be resolved through criminal

investigation and judicial trial and

even in the event that a judicial trial

occurs there are still considerable

difficulties in enforcement of the

judgment

the contract violations that the social

credit system seeks to address is

precisely this type of untrustworthy

economic activity those which are

inconvenient to prosecute under public

security laws

therefore at its most basic china social

credit system was first conceived in

1999 as an attempt at unification and

standardization of corporate data sets

and as a mechanism of enforcing the law

and ensuring the meeting of legal

obligations without which chinese

authorities understood ongoing crisis of

trustworthiness would tear the social

fabric apart

the founding document identified its key

aims as a prevention of production

safety accidents food and drug security

incidents commercial deception

production and sales of counterfeit

products tax evasion fraudulent

financial claims academic impropriety

and other such phenomenon which cannot

be stopped in spite of repeated bans

a parallel problem that the system was

conceived to address was the same that

was faced by virtually every western

state at some point in its history lack

of credit ratings that would facilitate

financial activity

lacking such financial indicators which

would let banks determine financial

credibility of a borrower chinese banks

by and large lent only to biggest

corporations and state-backed or owned

businesses

private individuals as well as small and

medium-sized businesses simply lacked

access to credit this meant that for a

very long time the chinese economy was

driven by cash transactions which became

increasingly unfeasible as the economy

developed

and even now more than 200 million

chinese do not have an account with any

financial institution and only 40

percent have any form of official

financial history at all

chinese officials tried various

political means to force financial

institutions to lend to small and

medium-sized businesses however lacking

necessary financial indicators to

measure credit worthiness these

political measures would not have any

positive long-term implications

an attempt to develop financial rating

was one of the factors that spurred the

development of what came to be known as

a social credit system

and now with the rise of xi jinping the

social credit system was conceptually

extended from corporate actors in the

market sphere to society at large

including the government itself because

it was understood that was not only the

crisis in the marketplace but a moral

social crisis of values where greed

selfishness vulgar materialism excessive

consumption corruption and related

problems were tearing chinese society

apart and diminishing the authority of

the communist party

as a response spiritual civilization

construction was initiated the goal of

which was propagation of patriotic

socialist values

it was soon incorporated in the

political and legal guidelines that we

today know as the social credit system

recontextualizing it as a set of

guidelines to foster a culture of

law-abiding sincerity and civic

responsibility increasing judicial

credibility improving the efficiency of

regulatory administrative services and

ensuring local governments honor

commitments to the people the party and

the state

contrary to some abstract thirst for

social control on the part of the

communist party it is these very

concrete tangible problems that stand as

the context for the origins of the

social credit system it was conceived as

a data-driven mechanism to restore

social trust in chinese society

however it is important to note that

contrary to the dominant narrative in

the west it was not really conceived or

developed as an extension of state power

at the expense of civil society but

quite the opposite

it was meant as a tool for market

self-regulation without unnecessary

intervention by the state bureaucracy

for instance by making certain

non-sensitive data available for public

use various applications were developed

that allowed the public to filter

businesses based on various criteria of

trustworthiness

furthermore the thinking went that by

being able to distinguish good market

actors from bad ones for instance by

measuring the history of their

compliance with the pre-existing

regulations and laws regulators could

focus their attention on the bad actors

instead of wasting resources and

bothering the good actors and so

reducing the bureaucratic overhaul of

over chinese society

this is how china's social credit system

was conceived and articulated in various

documents let us now analyze how it

actually functions in practice and what

kind of different initiatives comprise

it

as was mentioned before governments

could easily bypass it and the central

government had no way to really enforce

the requirement to efficiently check

upon its implementation or ensure that

the measure is even taken in the first

place

social credit system is supposed to tear

down the protective wall surrounding

local governments

on the one hand it is expected to

increase transparency by standardizing

and centralizing corporate data and

making it publicly available and on the

other hand it will give the central

government the tools to bypass and

subordinate local governments through

so-called national blacklists

contrary to black mirror dystopia it is

precisely these blacklists and not any

numerical rating that forms the basis of

the social credit system as it is used

by the central government

as was mentioned before the central

issue that faced china's legal system

was its inability to enforce both the

law and court rulings

blacklists were a direct governmental

response to this problem

the mechanism of blacklist is rather

straightforward when a person or a

business has a court ruling against them

and refuses to carry it out they are

placed on a blacklist until they carry

out their obligations

being placed on a blacklist has

widespread consequences one becomes

unable to travel cannot buy luxury items

cannot receive honorary titles join the

communist party hold high positions and

stand on enterprises and so on

sometimes they're also publicly shamed

study deliberately disproportionate

sanctions are meant to lead to an

establishment of a more trustworthy

environment and ensure that court

obligations are fulfilled

this is the only mechanism related to

social credit system that is used by the

national government and as we can see it

has absolutely nothing to do with

describing citizens or businesses in a

miracle score

blacklists are not even a parallel

system to the law and the judiciary it

only attempts to ensure the enforcement

of court rulings and it is made

explicitly clear that nobody can be put

in a blacklist without a prior court

ruling

such blacklisting is used not only by

the central government but by local

governments and separate governmental

institutions however negative

implications for those on such lists are

usually less severe and limited to their

respective fields of expertise

by most recent estimations only up to

half percent of the population is

affected by local blacklisting annually

much more importantly though local

governments are responsible for giving a

concrete form to the social credit

system as it is abstractly

conceptualized in law

as is usual in china this development is

decentralized so that every local

government can experiment and try to

find the workable form of social credit

system for their specific conditions and

within the limits of the guidelines that

are ultimately set by the central

government

various lessons are drawn and

adjustments are made in the process of

these developments

this is a source of misconceptions in

the west because westerners take a

particular limited and experimental

local program to be reflective of a

national development and the views of

the central government

it is difficult to even draw

commonalities between different regions

considering that the social credit

system is supposed to solve very broad

problems of trust and virtue

so for example when in 2017 the

government designated 12 particularly

successful local initiatives from which

important lessons could be learned it

encompassed such things as incentivizing

transparency of local businesses and

organizations making credit information

easy to access to the public

establishing ranking system for business

based on their regulatory compliance and

so on and so forth

as far as local citizens are concerned

the rage of initiative was also very

broad

in wrong cheng for example exemplary

citizens are praised by being displayed

on public spaces encouraging other

citizens to emulate the behavior that is

deemed exceptional

authorities in shanghai developed an

application which integrates publicly

available data and allows users to check

the trustworthiness of local businesses

as well as their own personal grade

the usage of the app is entirely

voluntary and there are no consequences

for having a low grade this is as a

matter of fact an explicit policy

formulated by the central government

on the other hand those deemed

exceptional trustworthy are eligible for

certain benefits such as discount flight

bookings

however the central government has made

it clear that any negative consequences

of the social credit can only be based

on the violation of the pre-existing law

and cannot be based on arbitrary whims

of the government bureaucrats

therefore when authorities in swinging

county attempted to develop a system

where citizens did indeed receive scores

based on various actions and had access

to social services restricted if that

score became too low both the residents

and the state media attacked the

initiative comparing it to good citizen

certificates issued by japan during its

wartime occupation of china and

initiative was immediately scrapped

therefore the dystopian western vision

of the social credit system as a

totalitarian imposition on an unwilling

and dull citizenry could not be further

from the truth

as one western report on the matter

notes

there is no shortage of examples where

central and local governments

reconsidered or reversed decisions after

popular protest

within the ambit of the social credit

system itself the response to the

abortive swinging trial demonstrates the

difficulty of implementing a policy that

is largely rejected by the citizenry

more recently the government's response

to increasing concerns about user

privacy on the dominant online platforms

tencent and alibaba by shutting down the

form a social credit trial and

reprimanding the latter further

underscores the need to ensure citizens

are at least for the most part on board

with the program

nevertheless let us deal with the

elephant in the room where does this

idea of a numerical credit rating which

captivated western imagination come from

it is in fact real but not in the way

westerners think of it

by and large it comes from the so-called

sesame credit and is developed by

alibaba

when alibaba was starting out as a

digital intermediary for buyers and

sellers as well as mobile payment system

it faced the same problem of trust that

we have already described earlier how to

develop trust in this digital

marketplace when barely anyone had

credit cards let alone measurable credit

histories or scores

sesame credit was a libabas solution

much like with the initial development

of the credit scores in the west alibaba

used various proxies available to it in

order to develop a numerical score which

would indicate trustworthiness of a user

on its platform

it is this score that is indeed affected

by one social activities friendships on

the platform and other indicators

however sesame credit functions only as

a private program akin to corporate

loyalty programs in the west with

absolutely no legal implications with

regards to one score

sesame credit indeed outgrown alibaba

and became a cultural phenomena with

some people even sharing their scores on

digital platforms

furthermore due to alibaba signing deals

with other businesses a high sesame

credit score indicating a level of

trustworthiness can grant certain perks

for instance one can rent a bicycle

without a deposit however the system

itself is entirely voluntary

while more dystopian articles in the

western media present this as a top-down

system of social control in reality it

is a system that is constantly

developing through feedback loops with

civil society

so for instance when certain

experimentation of local governments

transgresses what is deemed acceptable

by the public the latter makes its

position clear and the policies are

adjusted accordingly

in general chinese people do not view

the social credit system as an issue of

the government versus the people but as

something that is being built together

by the country as a whole

therefore considering the views of

chinese public of the system in general

western surveys find overwhelming

support according to the latest survey

more than 80 percent of the population

supported the social credit system

it would be difficult to expect

otherwise considering that the system

was initiated to deal with very concrete

tangible breath and butter issues of a

common chinese citizen

with regards to privacy concerns the

same survey showed that almost 80

percent of the chinese trust the central

government the most with regards to

their private data

the central government is followed by

provincial and then municipal

governments state-owned companies

foreign and then local enterprises

consequently recent years have also seen

the development of new legislation to

prevent data abuse from companies

handling chinese data both inside the

country and abroad in what is called the

personal information protection law

in many respects it has been described

as more comprehensive than gdpr by being

more strict regarding third parties and

data transfers

furthermore when representatives of

western businesses operating in china

have been surveyed about the corporate

social credit system only eight percent

viewed it negatively with majority

either supporting or holding neutral

views because it is expected to decrease

bureaucratic overhaul

this much was also recognized by a

report prepared by the request of the us

congress

this project has considerable potential

to enhance the bureaucratic efficiency

of the chinese state increasing its

predictive capacity and regulatory

responsiveness which could in turn

enhance party legitimacy in china and

other countries

as we can see the social credit system

has really nothing to do with

sensational dystopian views found in

western media that much is recognized

even by western experts who are

otherwise extremely critical of china

and its system

instead of being a social tracking

system it is entirely unrelated to

public surveillance system and does not

use any biometric data instead of being

a top-down system of social control it

was initiated to deal with very concrete

problems of an average chinese citizen

and has widespread approval

instead of being a system ascribing

ratings to citizens it by and large

works as a binary system of blacklisting

instead of rating people's activities

and social life it is based entirely on

the existing law and regulations

but why are westerners so insistent

about china's system being one of

totalitarian control despite all the

evidence to the contrary

at the end of the day it is not simply a

mistake or a misconception

it is rather projectional to china of

the illson degeneration of our own

societies

these dystopian visions of absolute

digital control tells more about our own

societies and the corruption of our own

elites rather than china and the

communist party like the author of the

first hit piece on china's social credit

system said this really seemed to be

pointing the way towards a dark

potential future

there were frankly a lot of signs and

similarities of things happening in the

united states

the chinese system uses data to deal

with the concrete problems of an average

chinese citizen with the overwhelming

support of the chinese masses

it is digitalization with chinese

characteristics we must neither copy

china nor judge it

instead we must ensure that the

inevitable digitalization in our own

societies result in solutions to the

problems of our working families and

within the context of our own

civilization instead of being used for

the enrichment of the oligarchs and

imperialist warfare

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