Milestones from the Market System to the Credit System

Authored by Zhang Zheng, the Director of the Director of the China Credit Research Centre at Beijing University, the following article is part of a series of official articles and commentaries published in 2014, immediately after the the adoption of the Planning Outline on the Construction of a Social Credit System (2014 – 2020).  

It is worth noting how – as the question of whether China is a market economy is still part of the global “querelle” about China  – already three years ago domestic commentators began moving away from the concept of ‘market economy’ towards a concept of ‘credit economy’. 

Milestones from the Market System to the Credit System

Central Government Portal www.gov.cn, 15 July 2014, 12:29. Source: Economic Daily

The issuance of the “2014-2020 Planning Outline for the Construction of a Social Credit System” has a great significance for the establishment of a correct developmental view for today and the future, for perfecting our country’s market economic system, for safeguarding the interests of market players, and for fair competition. It can be foreseen how implementation of the ‘Outline’ will become a milestone and a turning point in the process of reform of our country’s economic system development “from a market system to a credit economy”.

As the foundation of the modern market economy, the social credit system has a deep influence on the healthy development of a market economy. For a long time, due to our country’s credit construction lagging behind the progress of marketization, driven by the interest of an unilateral pursuit of economic growth, a variety of credit deficiencies and crises in integrity have been induced, exacerbating the risks of social and economic operation. In this sense, the issuance of the “2014-2020 Planning Outline for the Construction of a Social Credit System” has a great significance for the establishment of a correct developmental view for today and the future, for perfecting our country’s market economic system, for safeguarding the interests of market players, and for fair competition. It can be foreseen how implementation of the ‘Outline’ will become a milestone and a turning point in the process of reform of our country’s economic system development “from a market system to a credit economy”.

Our country’s social credit system mostly includes the following three meanings.

First, the credit system in four major areas is the core. According to the requirements of the ‘Outline’, the major points in the construction of a social credit system are ‘integrity in administrative affairs, integrity in business, social integrity, public trust in the judiciary’. Concerning integrity in administrative affairs, [the Outline] has raised requests about administration according to the law, comprehensively pushing forward openness in government affairs, constructing an effective information sharing system, definitely improving the efficiency of the work of government, and its level of services. Concerning integrity in business, [the Outline] has mentioned the construction of a social credit system in the 15 fields of production, circulation, finance, taxation, price, statistics, construction projects, government procurement, tenders on contracts, communication and transportation, e-commerce, intermediary services, conferences and exhibitions and micro-enterprises. Concerning social integrity, [the Outline] has mentioned the construction of credit in social insurance, healthcare, family planning, labor and employment, education and science, intellectual property, environmental protection, culture and sports, social organizations, internet services, and natural persons. Concerning public trust in the judiciary, the focal points are strengthening information openness in such sectors as the courts, supervision, and public security, integrity in law enforcement, civilized law enforcement, and the construction of a public trust system in the judiciary.

Second, three key links in the credit system are its guarantee. In order to ensure realization of the goals of the ‘Outline’, the full text utilizes much space, to perform an analysis of measures to guarantee the improvement of the social credit system. It puts forward the three key links of strengthening education to integrity and constructing a culture of integrity, accelerating and pushing forward the construction and use of a credit information system, improving the operational mechanisms of a social credit system based on credit rewards and punishments. These complement the above four major areas of credit construction, and have a major significance in developing the use of the social credit system, and realizing the normalization and the institutionalization of credit management and social services. In other words, in the final analysis the social credit system shall – by establishing a restriction mechanism based on trust – reach the goal of improving the behavior and ways of players in society and in the economy, and it is ultimately a tool of self-discipline. Therefore, only through a good education to a culture of integrity, an effective information sharing system and improvements to the system of credit reward and punishments, it will be possible to bring into play the limiting role of the credit system.

Third, advocating for and ecouraging the construction of a credit support system. In order to ensure its own implementation, combined with local experiences in the construction of a social credit system, the “Outline” requires all regions and departments to make periodic summaries and evaluations of the status of the construction of a social credit system in their respective jurisdiction and in relevant fields. At the same time, the “Outline” requires the creation of groups to promote implementation of the “Planning Outline”, and defines a concrete implementation plan based on their division of responsibilities and actual work. In particular, in those areas and departments where misconduct frequently occurs, administrative accountability shall be definitely implemented. It must be pointed out how, due to the relatively short history and practice of the development of the market economy in our country, if the enormous project of the construction of a social credit system is to be completed within a short time, it is necessary to rely on government, on society, and on market forces. Only through a multi-pronged approach it will be possible to achieve relatively good results. To this end, policy support must be increased, and all regions, departments, and units shall be encouraged to combine their own actual circumstances to first experiment the construction of a social credit system, particularly conduct breakthrough innovations in the construction of a rural credit system, a credit system for micro-enterprises, a regional credit system. This is a feature and a highlight of the “Outline”.

In the construction of a social credit system it is further necessary to pay attention to the following issues.

First, use methods in line with local circumstances, and allow different areas to focus on different aspects in the construction of a social credit system. Even in the construction of the same system, there can be differences in the focus of work at different stages of development, which requires the construction of a credit system in all regions, all areas, all industries to continuously explore innovation, and to find a path coherent with reality in the construction of a social credit system.

Second, repeatedly explore, and fully understand the difficulty of the construction of a social credit system. Improving the market credit system and the credit supervision system is a complex systemic task. In the past 100 years, the construction of a market credit system in Western countries has achieved a remarkable success. However, confrontations and contradictions between keeping promises and undermining trust have not stopped. The fact our country’s market economy reform is still in the primary stage of socialism determines that the goal of constructing a social credit system cannot be achieved in one night, and that a sufficiently sober recognition of the complexity and difficulty of this task is necessary.

Third, coordinate and overall plan to deal well with the relationship between government and market in the construction of a social credit system. According to the requirements of the “Outline”, in order to accelerate the pace of the construction of social credit system, except for strengthening fulfillment of responsibility by the government, and broaden policy support, it is also necessary to promote models of innovation, and to establish mechanisms of mutual encouragement among local governments.

Zhang Zheng, Director of the China Credit Research Centre at Beijing University.

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