How China’s social credit system actually works – it’s probably not how you think
- There’s
no scary algorithm behind the system amassing data and deciding an
individual’s worth to society, but that doesn’t mean there aren’t
concerns
7 Jan, 2023
It is easier to talk about what China’s social credit system is not than what it is.
Ever since 2014, when a six-year plan to create a system to reward actions that build trust in society and penalise those that do the opposite, it has been one of the most misunderstood aspects of China in Western discourse.
Now, new documents released in November 2022 provide an opportunity to set the record straight.
For most outside China, the words “social credit system” instantly conjure up images of a Black Mirror-esque web of technologies that automatically score Chinese citizens according to what they do right and wrong. But the reality is, this dystopian system does not exist, and the central government does not appear to have much appetite for building it, either.
Instead, the system that the central government has been slowly assembling is a mix of attempts to regulate the financial credit industry, enable government agencies to share data with each other, and promote state-sanctioned moral values – however vague that last goal might sound.
There is no clear evidence as yet of this system being abused to enable widespread social control, though it does remain possible that it could be wielded to restrict individual rights.
While local governments have been more ambitious with their innovative regulations, causing more controversies and public resistance, the countrywide social credit system is still a long way from materialising. And China is now closer than ever to defining what that system will look like.
On November 14, 2022, several leading government agencies collectively released a draft law on the Establishment of the Social Credit System, the first attempt to systematically codify past experiments on social credit and, theoretically, guide future implementation.
Yet the draft law still left observers with more questions than answers.
“This draft doesn’t reflect a major sea change at all,” says Jeremy Daum, a senior fellow of the Yale Law School Paul Tsai China Center, who has been tracking China’s social credit experiment for years. It’s not a meaningful shift in strategy or objective, he says.
Rather, the law stays close to local rules set and enforced by Chinese cities such as Shanghai in recent years on matters including data collection and punishment methods – providing them with a central stamp of approval.
At the same time, it does not answer lingering questions scholars have about the limitations of local rules. “This is largely incorporating what has been out there, to the point where it doesn’t really add a whole lot of value,” Daum adds.
So what actually is China’s current system? Do people really have social credit scores? Is there any truth to the image of artificial-intelligence-powered social control that dominates Western imagination?
First of all, what is “social credit”?
When the Chinese government talks about social credit, the term covers two distinct areas: traditional financial creditworthiness and “social creditworthiness”, the latter drawing on data from a wider variety of sectors.
The former is a familiar concept in the West; it documents the financial history of individuals or businesses and predicts their ability to pay back loans.
Because the market economy in modern China is younger, the country lacks a reliable system for accessing the financial records of people and companies. Building such a system, aimed at helping banks and other market players make business decisions, is an essential and uncontroversial mission.
Most Chinese policy documents refer to this type of credit using a specific word: “征信” (zhengxin, which some scholars have translated as “credit reporting”).
In 2013, the city [of Rongcheng] began by giving each resident a base personal credit score of 1,000 … In an extreme case, one resident lost 950 points over three weeks
It is worth remembering the central government has been pushing back against rogue actions taken by local governments in the field of social credit regulations
The latter – “social creditworthiness” – raises more eyebrows. Here, the Chinese government is indicating the need for a higher level of trust in society, and to nurture that trust, the authorities are fighting corruption, telecoms scams, tax evasion, false advertising, academic plagiarism, product counterfeiting, pollution and much more besides.
Not only will individuals and companies be held accountable, but so will legal institutions and government agencies.
This is where things start to become unclear. The government appears to believe that problems in all these areas are tied to a lack of trust, and that building trust can be achieved using a one-size-fits-all solution.
So just as financial credit scoring helps in assessing a person’s creditworthiness, some form of “social credit” can help when it comes to assessing the trustworthiness of people in other respects.
As a result, so-called “social” credit scoring is often lumped together with financial credit scoring in policy discussions, even though it is a much newer field with little precedent in other societies.
Adding to the confusion is the fact that in practise, local governments have on occasion mixed up the two. A regulation might outline how non-financial activities could damage your financial credit, or vice versa. (In one example, the province of Liaoning indicated in August that it is exploring how to reward blood donation in the financial credit system.)
On a national level, however, the approach seems to be to keep the two largely separate, and the new draft law addresses them with two different sets of rules.
Has the government built a system that is actively regulating these two types of credit?
The short answer is no. Initially, back in 2014, the plan was to have a national system tracking all “social credit” in place by 2020. The long-anticipated legal framework for the system was only released in the November 2022 draft law.
That said, the government has mostly figured out the financial part. The zhengxin system – first released to the public in 2006 and significantly updated in 2020 – is essentially the Chinese equivalent of American credit bureaus’ scoring systems and is maintained by the country’s central bank. It records the financial history of 1.14 billion individuals (and gives them credit scores), as well as almost 100 million companies (which it does not score).
On the social side, however, regulations have been patchy and vague. To date, the government has built only a system focused on companies, not on individuals, which aggregates data on corporate regulation compliance from various government agencies.
Kendra Schaefer, head of tech policy research at Beijing-based consultancy Trivium China, has described it in a report for the United States government’s US-China Economic and Security Review Commission as “roughly equivalent to the IRS, FBI, EPA, USDA, FDA, HHS, HUD, Department of Energy, Department of Education, and every courthouse, police station, and major utility company in the US sharing regulatory records across a single platform”. The result is openly searchable by any Chinese citizen on a recently built website called Credit China.
But there is some data on people and other types of organisations there, too. The same website also serves as a central portal for more than three dozen (sometimes very specific) databases, including lists of individuals who have defaulted on a court judgment, Chinese universities that are legitimate, companies that are approved to build robots and hospitals found to have conducted insurance fraud.
Nevertheless, the curation seems so random that it’s hard to see how people could use the portal as a consistent or comprehensive source of data.
How will a social credit system affect Chinese people’s everyday lives? The idea is for it to be both a carrot and a stick. An individual or company with a good credit record in all regulatory areas should receive preferential treatment when dealing with the government – similar to being put on a priority list for subsidies.
Individuals or companies with bad credit records will be punished by having their information publicly displayed, and will be banned from taking part in government procurement bids, consuming luxury goods and leaving the country.
The government published a comprehensive list detailing permissible punishment measures in 2021. Some measures are more controversial: for example, individuals who have failed to pay compensation decided by the court are restricted from travelling by plane or sending their children to costly private schools, on the grounds that these activities constitute luxury consumption.
The new draft law upholds a commitment that this list will be updated regularly.
So is there a centralised social credit score computed for every Chinese citizen? No. Contrary to popular belief, there is no central social credit score for individuals. And in fact, the Chinese central government has never talked about wanting one.
So why do people, particularly in the West, think there is? Since the central government has given little guidance on how to build a social credit system that works in non-financial areas, even in the latest draft law, it has opened the door for cities and even small towns to experiment with their own solutions.
As a result, many local governments are introducing pilot programmes that seek to define what social credit regulation looks like, and some have become highly contentious.
The best example of this is Rongcheng, a small city with a population of just half a million that has implemented probably the most famous social credit scoring system in the world.
In 2013, the city began by giving each resident a base personal credit score of 1,000 that can be influenced by their good and bad behaviour. For example, in a 2016 rule that has since been overhauled, the city decided that “spreading harmful information on WeChat, forums, and blogs” would lead to the subtraction of 50 points, while “winning a national-level sports or cultural competition” would earn 40 points.
In an extreme case, one resident lost 950 points over three weeks for distributing letters online relating to a medical dispute.
Such scoring systems have had a very limited impact in China, since they have never been elevated to provincial or national level. But when news of pilot programmes such as Rongcheng’s spread to the West, alarm bells understandably rang for activist groups and the media – some of which made the mistake of concluding such initiatives were applicable to the whole population.
Prominent figures, including billionaire George Soros and former US vice-president Mike Pence, further amplified that false belief.
No one can be sure similar rules will not be applied across the country, but it is worth remembering the central government has been pushing back against rogue actions taken by local governments in the field of social credit regulations.
In December 2020, China’s state council published policy guidance responding to reports that local governments were using the social credit system as justification for punishing trivial actions such as jaywalking, recycling incorrectly and not wearing masks. The guidance calls on local governments to punish only behaviours that are already illegal under China’s legislative system and not expand beyond that.
“When [many local governments] encountered issues that are hard to regulate through business regulations, they hoped to draw support from solutions involving credits,” said Lian Weiliang, an official at China’s top economic planning authority, at a press conference on December 25, 2020.
“These measures are not only incompatible with the rule of law, but also incompatible with the need to build creditworthiness in the long run.”
The central government’s intervention seems to have worked. In Rongcheng’s case, the city updated its local regulation on social credit scores and allowed residents to opt out of the scoring programme; it also removed some controversial criteria for changes in score.
Is there any advanced technology, such as artificial intelligence, involved in the system? For the most part, the answer is no. This is another common myth about China’s social credit system: people imagine that to keep track of more than a billion people’s social behaviours, there must be a mighty central algorithm to collect and process data. But that’s not true.
Since there is no central system scoring everyone, there’s no need for such a powerful algorithm. Experts on China’s social credit system say that the entire infrastructure is surprisingly lo-tech.
While Chinese officials sometimes name-drop technologies like blockchain and artificial intelligence when talking about the system, they never go into detail about how these technologies might be used. As the Credit China website shows, it is no more than a digitised library of separate databases.
“There is no known instance in which automated data collection leads to the automated application of sanctions without the intervention of human regulators,” wrote Schaefer in the report.
Sometimes that human intervention can be particularly primitive, such as the “information gatherers” in Rongcheng, who walk around the city and write down people’s good deeds by pen.
However, with the national system being built, it does appear that there is the need for some technological element, primarily to pool data among government agencies. If Beijing wishes to enable every government agency to make enforcement decisions based on records collected by other government agencies, that requires the building of a massive infrastructure for storing, exchanging and processing data.
To this end, the latest draft law references the need to use “diverse methods such as statistical methods, modelling, and field certification” to conduct credit assessments and combine data from different government agencies. “It gives only the vaguest hint that it’s a little more tech-y,” says Daum.
Because the system is so lo-tech, the involvement of Chinese technology companies has been on the periphery.
“Big tech companies and small tech companies […] play very different roles, and they take very different strategies,” says Shazeda Ahmed, a postdoctoral researcher at Princeton University, who spent several years in China studying the involvement of tech companies in the social-credit system.
Smaller companies, contracted by city or provincial governments, largely built the system’s tech infrastructure, including databases and data centres.
Large tech companies, particularly social platforms, have helped the system spread its message.
Alibaba (the owner of the South China Morning Post), for instance, helps the courts deliver judgment decisions via the delivery addresses it collects through its massive e-commerce platform. And Douyin, the Chinese version of TikTok, partnered with a local court in China to publicly shame individuals who defaulted on court judgments.
But these tech behemoths are not really involved in core functions, such as contributing data or compiling credit appraisals.
“They saw it as almost like a civic responsibility or corporate social responsibility,” says Ahmed. “If you broke the law in this way, we will take this data from the Supreme People’s Court, and we will punish you on our platform.”
There are also Chinese companies, such as Alibaba’s fintech arm Ant Group, that have built private financial credit scoring products. But the results, such as Alibaba’s Sesame Credit, are more like a loyalty rewards programme, according to several scholars.
Since the Sesame Credit score is largely calculated on the basis of users’ purchasing history and lending activities on Alibaba’s own platforms, it is not reliable enough to be used by external financial institutions and has only limited impact on individuals.
Given all of this, should we still be concerned about the implications of building a social credit system in China? The answer is yes. Even in the absence of a scary algorithm that scores every citizen, the social credit system can still be problematic.
The Chinese government did emphasise that all social-credit-related punishment should adhere to existing laws, but laws themselves can be unjust.
“Saying that the system is an extension of the law only means that it is no better or worse than the laws it enforces. As China turns its focus increasingly to people’s social and cultural lives, further regulating the content of entertainment, education, and speech, those rules will also become subject to credit enforcement,” Daum wrote in a 2021 article.
Moreover, “this was always about making people honest to the government, and not necessarily to each other”, says Ahmed. When moral issues such as honesty are turned into legal issues, the state has sole authority in deciding who is trustworthy.
One tactic Chinese courts have used to hold “discredited individuals” accountable is to encourage their friends and family to report their assets in exchange for rewards.
“Are you making society more trustworthy by ratting out your neighbour? Or are you building distrust in your very local community?” Ahmed asks.
As yet though, the social credit system does not exemplify abuse of advanced technologies such as artificial intelligence, and it is necessary to evaluate it based on the facts.
The government sought public feedback on the November 2022 draft document for a period of one month, but there is no expected date for when it will pass into law. It could still be years before the final product of a nationwide social credit system is seen.
Born in Wuhan, China, Zeyi Yang is a journalist and podcast producer now based in New York. He writes about immigration, race, LGBTQ matters and everything related to China.