China Pushes “Social Credit” System

China is attempting to develop a national “social credit system” where individuals and businesses receive “social credit” scores based on their economic and social standings and behaviors. The State Council, the chief administrative authority in the People’s Republic of China, issued a notice in 2014 officially outlining the blueprint for the system. The blueprint indicates that the government plans to launch the system by 2020. The notice states the importance of a social credit system to a Socialist market economy and governance structure. In the notice, the State Council also emphasizes the need to “strengthen sincerity in government affairs, commercial sincerity, social sincerity and judicial credibility construction…commend sincerity and punish insincerity.” The development plan accords with the five-year social and economic development initiatives in China. The basis for the social credit system arises from the Communist Party’s 12th Five-Year Plan.

Meanwhile, businesses in the private sector are experimenting with the system. According to the South China Morning Post, the internet conglomerate Tencent launched a nationwide individual credit scoring system in January 2018 within its WeChat mobile application. As SupChina explains, “A good Tencent Credit score is obtained when the company’s algorithm assesses your spending and social habits and gives you high points in each of five categories: ‘Honor, security, wealth, consumption, and social.” The launch of Tencent Credit was only a trial and ended days after its debut, according to Tech In Asia.

Tencent is one of eight companies approved by the People’s Bank of China in 2015 to pilot social credit score systems, and it is currently well behind its chief rival in e-commerce, Alibaba. Alibaba, another one of the eight approved companies, maintains a social credit system called Sesame Credit, which already has over 500 million users, according to Tech In Asia. As Xinhua News Agency notes, the criteria for social credit scoring are similar to that of Tencent Credit, using “a customer's credit card repayment, online purchase records, house rentals, and social networking.”

As the State Council states in the notice, the social credit system would ideally act as a reward-and-punishment system for Chinese citizens. Therefore, “sincere” behavior is rewarded under the system, whereas “insincere” behavior is punished. According to Yu Wujie, the chief scientist of Sesame Credit, customers with high social credit scores “might enjoy favorable treatment in future business, including avoiding paying deposit during hotel check-ins or easier visa procedures. The credit scores can even be provided as a reference for future match-making.”

Mr. Yu notes that the data will come from numerous sources, including e-commerce applications and police databases. Despite such efforts, the data may not be enough to accurately gauge “social sincerity.” According to Wang Wei, a professor of finance at Zhejiang University, “Whether it can reflect a person's credit conditions largely depends on whether there is sufficient data on his or her behaviors.”