China’s social credit system awards points to citizens who conform

“Once discredited, limited everywhere” is the message China’s government announced in a report, released in early March, to the 23 million citizens it had banned from purchasing plane or train tickets the previous year. These citizens, the government declared, had proven themselves to be “untrustworthy”, perhaps by spreading false information, forgetting to pay a bill on time, or even failing to walk a dog on a leash. As a result, their freedom of movement has been revoked.

This is the reality of social credit, a Chinese reputational measuring system that, according to governmental documents, “allows the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step”. Using a network of cameras equipped with facial recognition software, the government is able to identify and log the so-called harmful behaviour of every individual or business on Chinese soil. While the government claims the system purely seeks to restore trust in a corrupt society, the true capabilities of social credit are far more extensive and restrictive.

Surveillance culture
The modern-day social credit programme has its roots in the controlling, surveillance-based model that was envisioned by former Chinese Communist Party (CCP) leader Mao Zedong. From the establishment of the People’s Republic of China (PRC) in 1949 to Mao’s death in 1976, the chairman implemented a programme of mass surveillance that actively encouraged Chinese citizens to keep an eye on one another and report any actions that did not comply with dominant social ideologies. “It used to be like Neighbourhood Watch,” said Professor Steve Tsang, Director of SOAS, University of London’s China Institute. “It’s usually elderly people or others who are not in full-time employment keeping an eye out on everybody else and reporting whatever was happening in the neighbourhood to the local authorities.”

The modern-day social credit programme has its roots in the controlling, surveillance-based model that was envisioned by Chinese Communist Party leader Mao Zedong

Technological advances in the 20th century meant the CCP could supplement its word-of-mouth network with a web of cameras that watched civilians as they went about their daily lives. “[Surveillance] has become much more effective, smarter and well targeted with the addition of digital technology,” Tsang told The New Economy. As of 2018, there were more than 200 million cameras – one for every seven citizens – installed across the country. Many of these have now been fitted with facial recognition software, which can be combined with existing government data such as voice recordings, fingerprint data and blood samples to build a comprehensive profile of each Chinese citizen.

This physical surveillance is supplemented with online censorship and monitoring, with the government placing strict limits on what kind of news can be disseminated to the public and barring access to western social media sites. WeChat, which has more than one billion users across China, enjoys almost total market dominance, predominantly as a result of its relationship with the CCP. The messaging app has been subsidised by the CCP since its creation in 2011, and in April last year, a government watchdog revealed that it could access individuals’ WeChat messages, regardless of whether they had been deleted by the original user.

Class divides
In some ways, the social credit system is simply an extension of the ongoing mass surveillance programme in China – it serves to expand, digitalise and legitimise what already exists, with the added benefit that citizens will find being spied on more palatable if they’re rewarded for ‘good’ behaviour. The concept was first proposed in 2007 in an economic context, in a similar way to how financial credit ratings function in countries like the UK.

“Many Chinese do not have bank accounts and thus lack the types of credit histories common in western countries,” Timothy Heath, a senior international defence research analyst at RAND, told The New Economy. “The social credit system can help provide a means for financial entities to assess risk when offering financial services to customers.” In the initial proposal, a person would receive a positive score if they paid bills, loans and taxes on time.

The full social credit programme was announced as an opt-in scheme in 2014, and the government is aiming for it to be fully operational and compulsory for all 1.4 billion Chinese citizens by next year. Currently, around three dozen local government pilots are in operation, as well as a host of corporate schemes such as Sesame Credit, which is operated by Ant Financial. While these appear to be operating independently of municipal programmes, it is widely understood that the government is able to access private data, although it denies this. “Xi Jinping famously told the whole world, in society, in business, in schools, in everything, north, east, south, west and the centre, the party sees everything,” Tsang said. “The idea that any of the privately run social credit schemes can be run without the leadership of the party is just unrealistic, to put it very mildly.”

Sesame Credit’s scheme appears popular with Chinese citizens; according to a survey by the Institute for Chinese Studies at Freie Universität Berlin, 58 percent of the 2,200 respondents voluntarily participate in it. Those with a high score receive benefits such as free bike rental, or not having to pay a deposit when they reserve a hotel room. Having a good score is worn as a badge of honour, with many boasting about having been awarded points on social media. Sesame Credit has even teamed up with dating app Baihe so users can compare social credit scores as well as looks when swiping through profiles.

There’s a risk, however, that the system will lead to discrimination. “This system [can] exacerbate class inequalities, because many of the behaviours that lower social credit scores are more likely to be found among poorer classes,” explained Heath. Not paying bills on time, for example, could be put down to laziness, but it’s more likely to be a result of being on a low income and having to prioritise financial commitments. Yet, with social credit scores driven down by late payments, what is primarily an economic issue for most could spill over onto the social scale and result in a host of other problems, including cyber-bullying, isolation and loneliness.

A social plaster
The primary stated aim of the social credit programme is to improve relationships between citizens, businesses and the government, which are fractious in modern-day China. “There is a breakdown of trust in Chinese society generally – people don’t trust each other much, and they don’t trust the government much either,” explained Tsang. These issues stem from the Cultural Revolution, a sociopolitical movement executed by Mao between 1966 and 1976, which was designed to purge the so-called capitalist and traditional elements from society and re-impose Maoism as the driving ideological force. In traditional Chinese culture, questioning elders, teachers and cultural dogma were forbidden – society adhered to a strict hierarchical structure, in direct contrast with Mao’s communist ideology.

During the Cultural Revolution, young people “were literally required to report on counter-revolutionary behaviours or thoughts of their parents”, said Tsang. “Children were taught: ‘Your first and foremost loyalty is to Chairman Mao – you can’t trust your family, you can’t trust your friends, you can’t trust your teachers, you can’t even trust the party when it comes down to it’.” This long period of political conditioning created an atmosphere of tension and distrust that is an underlying, pervasive force in the modern era.

Trust between businesses and consumers is also extremely low as fraud and deception are rife in China, with private companies notorious for not paying workers an adequate wage or providing safe working conditions. This dates back to the 1980s, when Mao’s successor, Deng Xiaoping, implemented a number of reforms to turn China into a market economy. While these changes allowed for huge GDP growth, they also created regulatory problems. “You’ve got the issue of a society that has been transforming itself over the past 40 years from being dirt-poor and anti-business to being pro-business,” explained Tsang. “That will generate bad corporate behaviour anyway, plus you’ve got a basic breakdown in morality across the entire society. [It’s unsurprising that] the Chinese corporate world is pretty problematic.”

China’s economic transformation created space for opportunistic fraudsters and get-rich-quick entrepreneurs to exploit citizens in the knowledge that it was unlikely they’d be caught. For example, in the first three quarters of 2017, the government busted 870 pyramid schemes, whereby investors were told they would only receive dividends or a return on investment when they brought in friends or family members. Similar fraudulent schemes take place across the entire Chinese business ecosystem, from wealth management and insurance to dating apps and even medicine: in 2017, 100 leukaemia patients at Hebei Yanda Lu Daopei Hospital were swindled out of CNY 10m ($1.5m). They had given money to a charity investment programme that promised to match patient donations, thereby providing funding for essential medical treatment. It later transpired that the programme’s chief had run off with all the donations, although the hospital denied cooperating with the scheme and said it would continue to treat patients who had been scammed.

Trust between businesses and consumers is extremely low as fraud and deception are rife in China

Given the prevalence of fraud and the general breakdown in trust, it’s little wonder that Chinese citizens are suspicious of businesses. In this sense, it’s hoped that the social credit scheme will function as a kind of regulatory tool – under the current system, companies are given ratings in the same way people are, with points deducted for tax evasion, selling counterfeit goods or committing fraud. “The Chinese social credit system was originally designed in part to combat the pervasive problems of fraud and business malpractice,” said Heath. “Government regulators have simply been overwhelmed by the magnitude of the task, and thus tools that use data from the social credit system [have] been viewed by authorities as a critical means of helping improve the reliability and quality of the Chinese market.” While it may help to hold businesses accountable for corrupt behaviour, the system comes with a huge range of nefarious side effects, not least the severe infringement on the privacy of ordinary citizens. There are far better ways to regulate the corporate environment.

Solving trust issues between citizens themselves is much more difficult. Part of the problem lies in the fact that any discussion of the Cultural Revolution is heavily suppressed by the government – perhaps out of shame, or perhaps to preserve the cultural memory of Mao. By not allowing people to examine the cause of this breakdown in trust, there’s little hope of it being resolved; the social credit system simply papers over the cracks in that regard. Of course, there’s also the issue that by allowing citizens to examine history with a critical eye, it could lead to doubts about the current political system and even revolution. Through social credit, the government is maintaining a level of docility that allows it to survey its citizens. It’s a highly effective tool for control.

Dogmatic system
The crux of the problem when it comes to social credit is the way it ascribes moral value to certain behaviours, introducing an all-encompassing, quasi-religious aspect to the political system. It’s the nail in the coffin for a dictatorial government, solidifying its hold on the population. “It changes people’s behaviour,” explained Tsang. It forces them to adhere to a system of morality imposed by the political ruling party, fearing punishment if they do not conform. For example, points can be given for ‘good’ behaviour such as doing charity work or helping a family member, or deducted for jaywalking, spending too long playing video games or wasting money on ‘trivial’ purchases.

What’s more, individuals are now beginning to be demonised for committing acts that are defined as ‘bad’ by the government. In several cities, large electronic billboards have been erected near road crossings, which flash up with images of those that have been blacklisted or have had their social credit scores lowered for jaywalking. The government has also been known to remotely personalise the dial tones of debtors, so incoming callers will hear a message that roughly translates as “the person you are calling is a dishonest debtor”.

While the system has been likened to an episode of dystopian drama Black Mirror, it’s a terrifying, inescapable reality for today’s Chinese citizens. Tsang described it as “Orwellian madness on steroids”. The level of control the social credit system gives the government is likely to increase further in coming years, as facial recognition software becomes more advanced. “There is nowhere to hide. If you’re on the run for any reason, as a political dissident, for example, you’ve got nowhere to [go],” Tsang said. The more social credit is expanded, the more control the government has, and the more China moves away from resembling any kind of democratic society. “When we get to that point, then there really isn’t much privacy or individual freedom or rights left,” Tsang told The New Economy.

For businesses, the system could be particularly dangerous as, under current plans, the government makes no distinction between domestic firms and international companies that operate within the Chinese jurisdiction. “The Chinese Government has used its social credit system to pressure foreign companies into adopting political positions favourable to the CCP – such as when the government warned that failure by western airlines to use maps that include Taiwan as part of China would receive lower ratings,” said Heath.

Global implications
There’s also the issue of how social credit will affect relations between China and western nations. “We’re currently looking at an authoritarian China that has the capacity to shape the economic and technological agenda,” said Tsang. Being the world’s second-largest economy gives China a seat at the table alongside top global democratic powers, which is problematic if it does not subscribe to those same democratic values.

Nations that have close ties with China and companies that operate in the country’s jurisdiction now face a choice between protecting profit margins, privacy consequences be damned, or compromising economically in the fight for something greater: a commitment to freedom. For those living in China, escaping the consequences of social credit will be much more difficult, particularly given the level of governmental censorship and coercion that occurs. The onus, therefore, is on the international community to put pressure on China to prevent it from increasing its hold over its citizens. However, interference from other nations could have a detrimental impact on global diplomatic and economic relations, and may end up putting Chinese citizens at risk.

We have seen first-hand the political, economic and ethical implications of oppressive regimes over the course of the 20th century. We have seen what happens when freedom is fundamentally compromised. We understand that George Orwell’s novels are works of fiction – let us work to ensure they do not become a reality.