China's social credit

Business operating in China need to understand what China's social credit system is and is not. Westerners are familiar with credit checks and online ratings. China’s social credit just extends the idea patchwork-like to many other parts of life. But social credit will apply to businesses, too.

Eventually, firms will be required to hand over a great deal of commercial data to authorities, starting with tax data, in order to implement the system. Transparency and oversight in that regard is a critical business risk.

Firms will naturally wonder about the punishments they risk for a poor social credit evaluation. Reputational damage to brand? Slower approvals for licences and more expensive credit? Senior managers being denied train tickets?

Foreign firms will wonder, too, whether authorities will use social credit for the benefit of Chinese companies at their expense.

The severity of these risks will not be known for some time as social credit gets implemented, but the first step in evaluating the risks is to know what social credit is and what it is not.

Businesses operating in the country need to understand the differences.

Social credit is not a general term for creepy Orwellian things China does using technology. It is not a system of surveillance. It is not based on AI or big data, and it does not involve collecting data on citizens that the authorities do not already have.

Nor does it assign every citizen a numerical score based on their political loyalty -- or any score at all, except in some local-level programmes. And it definitely does not involve ‘Minority Report’-style punishment for crimes that are yet to be committed.

What social credit is

Social credit refers to something very specific and far less exotic.

It is a system for imposing administrative punishment for certain clearly defined behaviours that are deemed antisocial or that are illegal but were not deterred by existing penalties -- late payment of fines, non-payment of debts, petty fraud, fare-dodging, jaywalking etc.

People found to have committed these behaviours are added to blacklists. Being put on one of these blacklists means you are named-and-shamed and subjected to certain clearly defined penalties that are inconvenient and potentially humiliating, such as not being allowed to buy airline tickets or stay in posh hotels.

Westerners sometimes misuse ‘social credit’ as a general term to denote China’s technology-empowered surveillance and repression

The main purpose of social-credit blacklists is to encourage trust between businesses and businesspeople in a low-trust society in order to facilitate smoother market transactions.

Sesame Credit

Media commentary often confuses social credit with Sesame Credit -- a credit rating service that e-commerce firm Alibaba offers on its e-commerce platforms. Users can voluntarily sign up to be rated in order to show vendors and customers that they can be relied on to behave as a responsible counterparty -- to pay for what they buy, on time, and to deliver the product or service they say they will.

People have sometimes used their Sesame scores outside the context of e-commerce. People have, for instance, cited it on heir dating websites as a sign that they are decent people, again in a low-trust society where con artists stalk. Employers might also look up a candidate’s Sesame rating the same way employers might look up a candidate’s Facebook profile. These uses of Sesame Credit ratings are not without controversy in China.

Sesame Credit has also caused controversy in China because the ratings are derived in an opaque manner. In theory, they are based on the user’s past behaviour, but in practice there may be (or have been in the past) an element of ‘profiling’ using data analytics that altered the rating based on characteristics unrelated to their individual behaviour, such as age group of gender.

Technology-empowered repression

Westerners sometimes misuse the term social credit as a general term to denote technology-empowered surveillance and repression in China.

Political repression in China uses a wide range of legal, extrajudicial and technological tools.

Social credit is not one of them.

The Chinese surveillance state spies on its citizens through traditional methods -- informants, the Party apparatus and the secret police -- and it also develops novel technological tools as well.

There are compulsory satellite trackers in vehicles, facial recognition cameras in public spaces, and, in Xinjiang, software installed on phones that gives the authorities access to the contents.

Chinese authorities already have plenty of means to control and neutralise activists and others opposed to the Party and government

Chinese netizens who post politically troublesome comments online fall foul of laws on cybersecurity and state security. Chinese social media platforms are required to censor and spy on what people post, on the government’s behalf. All this is intrusive and scary -- but it is not social credit.

For Party members who show disloyalty, the Party hierarchy and in more extreme cases the Discipline Commission will reprimand them and, if breach is considered serious, issue penalties such as demotion and suspension.

Chinese police routinely spy on and harass political rights activists. Courts have a range of charges they can use to put activists in prison, from ‘causing a disturbance’ to ‘subverting the state’. Failing that, plainclothes goons working for the authorities can harass or beat them up.

No doubt China will eventually try to complement all these things using ‘predictive policing’-type algorithms to nip political activism in the bud. Maybe they already are.

But none of this is social credit -- and there is no reason to misuse the term ‘social credit’ as a byword for it.