Special Feature: The 10 Most Pressing Issues in Social Credit Systems

As a special feature of the China Social Credit System Blog, this week leading scholars and experts from PennState, the Foundation for Law and International Affairs, and the Coalition for Peace and Ethics present their comments on the most pressing issues about social credit. These are questions of global relevance that deserve to be examined within a context beyond China, and the more limited field of area studies. An initial reflection on issues surrounding social credit in general, and the Chinese project on social credit, can be found on the ‘Law at the End of the Day’ Blog. This post elaborates and expands upon the views expressed therein.

#1. Misconceptions
Generally speaking, China’s social credit system has not been represented under a favorable light by the press. Do misconceptions about the system exist and, if so, where do misconceptions come from?


Keren Wang

Keren Wang

Keren Wang: Critics frequently paint the proposed Chinese social credit system as some sort of autocratic “Orwellian” nightmare. While it is quite understandable for one to raise dystopic worries for any proposal of sweeping governmentality reform, this “Orwellian” metaphor is simply a mischaracterization of the type of dystopian outcome that we might see. If we insist to go with this literary analogy route, I would say that the Chinese social credit system is much more Brave New World than Nineteen Eighty-Four.

 Here I would like to channel Neil Postman’s observation on the divergent worldviews between Orwell’s Nineteen Eighty-Four and Huxley’s Brave New World:

 What Orwell feared were those who would ban books. What Huxley feared was that there would be no reason to ban a book, for there would be no one who wanted to read one. Orwell feared those who would deprive us of information. Huxley feared those who would give us so much that we would be reduced to passivity and egotism. Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance. Orwell feared we would become a captive culture. Huxley feared we would become a trivial culture, preoccupied with some equivalent of the feelies, the orgy porgy, and the centrifugal bumble puppy…

Postman’s commentary translates well in understanding the appropriate dystopian critique for the Chinese social credit system. Despite the appearance of being a government-led effort of mass-surveillance and policing, the Chinese government in reality takes the “back seat” in this social credit project. The real drivers of this social credit reform are corporate actors – most notably this emergent generation Chinese “new-industrialists” such as Jack Ma (founder and chairman of Alibaba Group) and Ma Huateng (founder and chairman of Tencent). They are the Chinese counterparts of American new-industrialists like Elon Musk and Larry Page, and the Chinese social credit system has as much to do with corporate interests as it does with the interests of the central government.

 Long before the publication of the 2014 “State Council Notice concerning Issuance of the Planning Outline for the Construction of a Social Credit System,” Chinese e-commerce services (e.g. Taobao, JD.com) and social media platforms (e.g. Tencent QQ, Wechat) had already developed an extensive and effective complex of mobile/online payment and buyer-seller rating systems. In terms of functionality, those integrated multi-platform payment and rating mechanisms developed by major Chinese tech companies have successfully addressed many of the “social trust” issues raised by the 2014 State Council Notice, at least within the domain of online and mobile transactions. On the other hand, over the past decade or so, the use of online and mobile transactions had expanded and proliferated in virtually all areas of consumer activities within China. Furthermore, the displacement of online/mobile transactions over traditional means in China had transpired at a more rapid pace than in most Western economies. In terms of functionality, much of the social credit system has been already been operating in China long before the government officially announced its plan. While tech giants such as Alibaba and Tencent are Chinese companies, their operations are multinational and therefore bear interests that are far more transnational than that of the Chinese government. To borrow a Marxist term, it can be said that those Chinese tech giants are the real “vanguard” actors behind this social credit project.

Shaoming Zhu: Some Western scholars may assume that the social credit system is established within a system where some constitutional rights are not well protected, such as the protection of private information. Some Western media may consider the social credit system as a tool that the government can use to control or monitor citizens. Such misconceptions are partially a product of the ideological bias against the Chinese system. But the more direct cause for these misconceptions is that Western media and scholars do not fully understand the difference between the Chinese social credit system and the credit system in the US or Europe. The Chinese social credit system is a social mechanism built on both legal and moral grounds, within which dishonest records will be disclosed and disseminated. Functionally speaking, the Chinese social credit system has a wider goal than the Western credit system. It also aims to standardize industries, especially professional industries, into the system. When it comes to the standardization of the work of a particular industry, a reward and punishment mechanism will be created accordingly.

Larry Catà Backer

Larry Catà Backer

Larry Catà Backer: It should be emphasized that China’s social credit system has received a lot of bad press in the West, where it is not clear that social credit is understood. Or perhaps it is more plausible to suggest that the bad press is the consequence of fear and ignorance in the absence of much investigation. What the bad press does serve as good evidence of is the way it nicely illustrates the way that Western media and intellectuals have been projecting fears of changes in the West on the social credit system in China. This campaign to project Western fears of what may be occurring in Western society in the private sector onto the public sector projects in China is extremely helpful in understanding the social credit crisis of the West but it tells us little about the Chinese efforts to theorize and implement its own system in its national context. One must remember that in the West our society has been socialized into accepting a fairly extensive social credit system with direct effect on individuals for many decades.  Private credit ratings, employee ranking and assessment (which might be shared), grocery store preferred customer and shopper cards, reward credit cards are all social credit system and quite embedded in intimate individual activity in the West. The Chinese social credit system may adapt many of these Western models. But it is too early to tell.  In any case at least in some respects, the effects of social credit on individual consumers may, ironically, merely bring Chinese individuals up to an equivalent level of intrusion as that already well established in the West.

Flora Sapio

Flora Sapio

Flora Sapio: It is very difficult to talk about misconceptions about China’s social credit system.

The very words ‘social credit’ make little sense to any average person who was born, raised and educated in the West. Even though the words ‘social credit’ do refer to a specific, little-known philosophical movement founded in the UK in the 1920s, the notion of ‘social credit’ is virtually unknown to ordinary people in the West. When I try to explain to laypeople what is it that I am documenting, the question I normally encounter is ‘what is social credit?’ In response to this question, I try to describe what social credit in China is, by providing examples drawn from similar practices, as they exist in several Western jurisdictions. These examples may involve citizen identification through the use of personal identity numbers, mass fingerprinting, the collection of personal information for marketing purposes through customer loyalty programs, personal credit ratings, the use of personal information to shape consumers’ choices, the use of CCTV cameras and facial recognition software to control traffic, fight violent crime, maintain public security in our cities, and so on. The reactions I normally encounter are in most cases neutral. Average Western citizens have very few misconceptions about social credit in China – they observe that, well, given its rising levels of economic development, China would sooner or later get to where we are, and perhaps even find more sophisticated methods of rating and assessment.

To me, misconceptions about China’s social credit system are limited to certain sectors of public opinion, and they are simply the result of a body of knowledge that is still imperfect, fragmentary, tentative, and not based on a truly comprehensive analysis of all existing primary sources. Again, once you explain to them what ‘social credit’ is, average folks have very few misconceptions about social credit…

#2. The Unity and Fragmentation of China’s Social Credit System
As China’s social credit system is still being contructed, one of the most obvious questions concerns whether its construction is proceeding smoothly or whether significant regional variations exist.


Zhu Shaoming

Zhu Shaoming

Shaoming Zhu: The “State Council Notice Concerning Issuance of the Planning Outline for the Establishment of a Social Credit System” has established the timetable and goals for the development of the social credit system. The Outline seeks to integrate administrative, commercial, judicial, and social work, covering more than 20 industrial fields. Ministries at the central government level and provincial governments are making their own regulations that are relevant with the various fields. I think that is why it appears fragmented right now. Shanghai, as the pilot city, has issued the Shanghai Social Credit Regulations, which is the first comprehensive regulation that clarifies the subject matter of the legislation on the social credit system and its implementation. I believe we will see more and more compressive regulations issued in other provinces.

Larry Catà Backer: Chinese government at all levels are currently working on issues of scope and implementation.  As is usual in the Chinese system, the state has produced a number of conceptual statements, and a number of governmental units have sought to start pilot and other programs.  But the efforts to date have been tentative and to some extent quite contingent. One of the projects that tends to get some attention are those developed by the Shanghai government. These, to a large extent appear to suggest the framework of Trip Advisor and similar programs of data gathering and dissemination (with consequential effects of producers). 

Flora Sapio: We can talk about one broad, overarching plan to complete the construction of a social credit system by 2020. To be implemented, however, this plan needs to be disaggregated into provincial and local plans, into sector- and industry-specific plans. The current developments of the social credit system involve the process of disaggregating national level plans, and running pilot programs to understand how each province, locality, and industry can and should comply with the broader requirements set by the Planning Outline on the Construction of a Social Credit System (2014 – 2020). This is a long, complex process, involving efforts which, in some cases, have been pioneering – this would be the case of Shanghai municipality for instance.

#3. Twists and Turns in China’s Reform Path
China recently announced its decision to temporarily suspend licenses to develop consumer social credit scores. The decision was interpreted negatively. Is such an interpretation justified? Is another interpretation possible?


Shaoming Zhu: It is clear that the licenses would authorize a significant power. The world is changing. The leading authority of the world has been transferred from religious leaders, to politicians, and now to data owners. The social credit system is not market oriented. It requires the government’s macro-control, especially given that the legal framework of the social credit system has not yet been established. The time for granting licenses to the private sector might not yet be at hand. At this point, the most important thing is to create a healthy system and method for collecting data and to protect access to the data rather than allowing big data companies to build their own regimes, which could be problematic in the future.

Larry Catà Backer: We can only speculate here. But some speculation may well point to a number of possibilities. First, the pull back might suggest that it was thought necessary to reset the relationships in light of changing objectives.  Second, it could mean nothing more than that the state is now considering engaging in the work itself. Third, it might suggest that a new form of cooperation between state and private sectors might be in the works.  Fourth, despite the allure of melodrama into he West with respect to all things Chinese, it likely does NOT suggest that the Chinese have rejected cooperation or licensing, or engagement to mutual benefit. Do not be surprised to see big technology intimately involved on the development of social credit projects. How that involvement will be structured though is for the moment an open question.

Flora Sapio: As I have said in my answer to the previous question, the process of creating a social credit system – as this system is understood by the group of public, private and societal actors involved in its construction, operation, and monitoring – is a complex process that is taking place on a large scale. Given its scope and breadth, the decision to pull back plans to license big technology companies to develop social credit scores appears entirely normal. There is no such thing as a linear reform process. Or, better, the linearity of reform processes lies in the eyes of observers more than in the realities of their implementation. In practice, reform can be a twisted process, one involving several feed-back loops, and a continuous fine-tuning of policy, regulatory, and practical reform measures.

#4. Integrity and Corporate Culture
Will companies use the social credit system only to boost consumption, rather than attempt to promote a culture of integrity?


Shaoming Zhu: The primary goal of all private companies is to make profits. If increasing integrity will boost consumption, private companies will definitely have the interest. Alibaba is a typical example. One reason that the transactions on taobao.com continue to grow is due to the rating system the platform has created for customers and merchants. It generated the Ant Financial Service Group. I think it is not necessary for private companies to value consumption over integrity, or vice versa. However, when it comes to legislation, the legislators will have to decide the values of the law and their priorities.

Larry Catà Backer: I think it is a mistake to think about this issue in these binary terms. That certainly is NOT how the companies or the state likely thinks.  To infect their logic with this framework merely distorts any analysis and reduces its value. Private companies, like the state, have interests in data for a number of reasons, some of which include consumption, and some of which include “integrity” issues (which was emphasized in the official pronouncements to be sure). Both private companies and the state also have strong interests in data as a means of responding to demand and in developing better strategic planning.  Both are interested in social credit as a means of managing internal institutional cultures and of affecting and managing consumption, and better responding to both. Both are interested in social credit as a means of better engaging with the elaboration of cultural, economic and political narratives through which people understand and respond to the world.  The levers of that engagement are produced through social credit derived data. But the judgments are more complex. And both might well be interested in social credit as a way to be more responsive to their consumers and other stakeholders while remaining true to their institutional ideologies. 

Flora Sapio: 

Companies can, in many respects, be analogized to any other governance entity such as the state, the family, or any other aggregation of individuals. In the same ways as the goals of a state, a family, or an association cannot be reduced to the dichotomy of “increasing consumption versus increasing integrity”, it is not possible to reduce the goals of private companies to an either-or logic. As a phenomenon of truly global dimensions – considered both in its domestic and transnational reach – the construction of a social credit system by private actors such as enterprises involves every aspect of corporate governance. Social credit does not exist to boost consumption while ignoring integrity. Neither does it exist to increase integrity and see a drop in consumption. It is a more complex phenomenon with ramifications extending deep into the multiple spheres of corporate, societal, and state governance, causing the three spheres to partially merge into one another.

#5. Fear and Alarmism
Will Western companies see their compliance costs soar up? Will they lose proprietary technologies, data, and information to hackers? Will algorithms ever be transparents? These are some of the fears raised by a report recently published by MERICS.


Shaoming Zhu: I don’t think these are potential negative impacts. Instead, I think these are exactly what the social credit system aims to resolve. “Rome was not built in a day,” as the saying goes. According to the “State Council Notice Concerning Issuance of the Planning Outline for the Establishment of a Social Credit System (2014-2020)”, China aims to establish the fundamental legal system for social credit, as well a credit investigation system that covers the entire society with credit information and resources, a credit supervision and management system, a credit service market system, and reward and punishment mechanisms. I think it requires some time to resolve the potential problems. Right now, improving the technology and learning the experiences and lessons from other countries are critical.

Larry Catà Backer: Litanies of negatives remind me of how risk adverse people react to innovation and in the protection of the status quo. The litany of negatives reminds me of the negatives that were so clearly powerful a century ago when one spoke about the “revolution” that might evolve from an automobile culture. Those negative impacts appear laughable in retrospect—especially those which find an echo in the negatives associated with social credit: technology and delivery, compliance costs, corruption, bad purpose, and error of application. Indeed one could agree with all these negatives and find them largely irrelevant as negatives. These suggest current challenges to the development of the system—but none of these suggest fundamental problems that cannot be overcome. 

Flora Sapio: There is absolutely nothing I would add to this list. In fact, I believe the list is perfect as it is. If I were an entrepreneur I would find the list very reassuring; if social credit will have a negative impact on the local market, then social credit will have a negative impact on the local market and I may therefore decide differently on my investment.

This, however, reminds me of an episode where similar concerns were raised, in the early 1980s, by a certain delegation from a certain European country following a meeting with a certain mayor, in relation to his city’s plans for urban development…

Back then, investors did not fear ‘costs of compliance’ but ‘the pervasiveness of guanxi’. They did not fear ‘immature technology’ but ‘bureaucratic red tape’. They were not afraid of ‘risk to proprietary data’ but of ‘insecure property rights’ and ‘sudden reversals of economic reform’. Having found those beliefs very reassuring, and having acted upon them, today investors from that certain country are still far behind their European peers who dared to risk and innovate.

#6. Fraud and Corruption
Will social credit be useful in combating fraud and corruption?


Shaoming Zhu: Yes. This is one of the goals established by the Planning Outline for the Establishment of a Social Credit System. The construction of governmental affairs and judicial integrity mechanisms will effectively prevent and combat corruption. The promotion of commercial and societal integrity should help decrease fraud in civil and commercial affairs.

Larry Catà Backer: It is possible that social credit might be effective in combatting fraud and crime. It it is also as likely that it will create additional possibilities for fraud and corruption. Again the automobile analogy—autos made it possible for police to deliver services faster and more effectively, but they also provided criminals with a new weapon to broaden and expand criminal enterprises.

#7. Social Credit in the West
Will the West use China as an example, to introduce social credit systems in our countries?


Shaoming Zhu: It is an inevitable trend that some sort of social credit system will be developed everywhere, maybe in different forms or with different emphases. Eventually, there will be global standards for social credit ratings due to frequent civil and commercial communications and transactions. But that requires the efforts of the global society as well as wisdom in the application of Internet data worldwide.

Larry Catà Backer: It is dangerous to try to read the minds of states—if only because each state is itself an aggregate of very many individual agendas and institutional imperatives. If the social credit system can be effectively implemented, and if it can be transposed into other national cultures in a way the is compatible to ruling ideology, then the answer is yes. And in my opinion, social credit is already poised to become a dominant mode of managing behavior all over the world.

Flora Sapio: The question is not so much whether other countries may want to try to emulate China’s social credit system. The notion of ‘social credit’ as conceived in China is, to a large extent, foreign to the West. A majority of the mechanisms that, considered as a whole, constitute the social credit system in China, already exist in the West. They have become so familiar to us that we no longer notice them. Am I concerned that, when driving into a parking lot in Rome, a computer takes a picture of my plate number and sends it to a database? Isn’t this much more convenient than having to manually input your plate number into the parking meter every time you have to park? The question is whether this specific mode of governance has become one more tool in the arsenal of global governance techniques. This is a question I would answer in the affirmative.

#8. Social Credit and Artificial Intelligence
What is the nexus between social credit and AI? Which role will AI play in the development of a social credit system?


Larry Catà Backer: It depends. AI can be understood as a means of reducing administrative discretion to algorithm that can be made to exercise choice within parameters. Governments have been trying to do this with individuals for centuries. As an aid to disciplining discretion AI has potentially useful applications. As a means of avoiding responsibility, or of hiding behind machine decision making to avoid individual responsibility (or governmental responsibility) then AI poses a danger to the integrity of any system that would so “wash their hands” of governance, in the fashion of Pontius Pilate.

Flora Sapio: It is still difficult to say what role AI will play in the social credit system. AI itself is a broad field, and a technology capable of the most diverse applications. AI is nothing more than a tool. Even though there are those who may dispute this statement, a tool is a tool. A tool is value-neutral. Value – that is, the use of a tool for goals beneficial to an entire community, local or global – is bestowed upon the tool by those who use it, and by the goals they intend to use it for.

#9. Mass Profiling and Mass Surveillance
How concrete is the risk of mass profiling and mass surveillance?


Larry Catà Backer: The danger of profiling exists today without the benefit of big data. Big data and algorithms merely enhance the human propensity to essentialize and sort humans by investing specific recurring dada bits with significance. The danger is that the profiling—the prejudice of investing data with consequence ground din specific characteristics will become more efficient. More dangerous still is the willingness to invest data with a kind of unassailable quality that makes challenging data or algorithm impossible.

Flora Sapio: Profiling has been a reality for a long time. Without going too much far back in time, I may want to cite a case where, in the very heart of Europe, construction workers were being profiled, blacklisted, and denied employment, for such behaviors as “wearing anti-Nazi League badges and insignia”. Algorithmic profiling depends on what an algorithm is. An algorithm is noting else than a decision-making procedure expressed through formal language. Many of us are using algorithms everyday, yet we don’t always realize we are doing so. Algorithmic profiling as such exists whenever anyone reaches a decision about another person, following a course of thought, or any kind of procedure where ethnicity, sex, religious beliefs, political orientation, economic and social condition etc. play the role of key determinants. Whenever we see human beings not as human beings, but through the lenses of ‘race’, ‘social condition’, ‘political orientation’, etc. we are profiling them. Whether we do so through our minds alone, or through the help of a computer language, it makes little difference.

#10. Personal Privacy Protection
Will social credit in China safeguard personal privacy?


Shaoming Zhu: In public affairs, China does not have a good track record of keeping data transparent, either. Compared with keeping data private or transparent, it is more important to categorize data, keep the data secure (i.e., prevent abuse and fraud), and use the data wisely. Some data needs to private; some data needs to be transparent. It depends on the type of information. The Shanghai Social Credit Regulation has stated that Social Credit Information can be divided into two categories: Public Credit Information and Market Credit Information. Articles 14 and 17 have clarified what information may not be collected. The regulation has also formulated the information security management duties (Articles 19 and 20), the circumstances when information can be sought and purchased (Article 28), as well as the protection of information subjects’ rights and interests (Chapter 4).

Larry Catà Backer: This question actually masks a more interesting one: the essence of social credit is grounded in transparency. But the data on which its judgments are based are grounded in privacy concerns. The contradictions of this simultaneous importance of transparency and privacy creates sloppy analysis and even sloppier understanding of the role of privacy and exposure in social credit (in China and in the West). China does not have a good track record of keeping data secret—true enough, but usually people who make that criticism then also criticize China for being a state that is obsessed with secrecy. Indeed, much press coverage of China is grounded in a fundamental critique of the effectiveness of its state secrets laws and its unwillingness to share information. So the underlying question is slightly different—to what extent is China willing to sacrifice the privacy of individuals to preserve the privacy and objectives of its social credit system? The Chinese have indicated a determination to treat data with some sensitivity. The integrity (and effectiveness) of social credit will depend on this. I suspect that China may be better at respecting this secrecy—not within the state, but among the public.

Flora Sapio: Beyond the social credit system itself, I would be concerned about respecting secrecy and the privacy of personal data in the private sector, as well as among the public. A piece of personal data collected and stored in a state-run database can in most cases do little or no harm. A piece of personal data illegally purchased and sold by a company can, in the best case, result in an individual being annoyed by unwanted advertising. In the worst case, however, it can have a serious impact on major life choices for that individual. A piece of personal data that is disclosed by a member of the public and used for cyber bullying, ‘human flesh searches’, or to otherwise bring harm to an individual is a much more pressing concern. These concerns were raised long before the official launch of the social credit system in 2014 and are not unique to China or to any specific country. This is a global concern. The nature of personal data is such that it can be easily acquired by anyone with nothing more than a smartphone. Yet not everyone is fully aware of what data items are considered personal data, and which can be lawfully collected or disclosed through our electronic devices.

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