The original Dutch version of this article was published in 2018. Besides some small changes the original goal of the article has been maintained. This article doesn’t so much try to explain what the social credit system is but moreso what it isn’t. As such it focusses on debunking a number of misconceptions that were prevalent at the time (and still are). At the end of the article you will find a video with a lecture I gave about the topic, one year after writing this article. It contains more information about the social credit system and I suggest you watch it as a companion to this article.
Since writing this acticle, a lot more information has been published on the social credit system by various experts and journalists. I have included an extensive list of reliable sources for extra information.
Ever since 2015 it periodically happens: the discussion about China’s social credit system flares up again. Opponents of legislation that gives governments too much control over citizens’ data also frequently use the social credit system as an example of ‘a society we don’t want to live in’.
All this is accompanied by a number of persistent misunderstandings that have been circulating on the internet and in the mainstream media for six years now. In this article, I want to try to debunk some of the most persistant misunderstandings. I will also try to create a little more understanding for the actual situation in China. When evaluating China’s social credit systems – spoiler: there are several! – we are making the mistake of looking at it through a Western lens and from the context of our own societies. But China is not the west…
Note that in this article I do not attempt to criticize or defend the social credit system. Instead I try to introduce some necessary nuances.
Misconception 1: There is one social credit system
The biggest misconception is that there is only one central social credit system. This in turn leads to various other misuncerstandings when characteristics of one system are projected as something that his happening everywhere within China. Simply put, there are two groups of systems. To emphasize the difference between the two, I personally tend to refer to financial credit system and social management system even though you might not find that terminology and distinction clearly stated in China.
Financial credit system: In the west we have various credit rating systems that financial institutions like banks use to determine if a consumer is financially creditworthy. In other worse, will they be able to repay a lone when it is given to them? Partly due to the lack of a similar system in China, the Chinese government allowed a number of private companies to develop their own credit rating systems using their own customer data. The most well-known of these is Sesame Credit by the company that is currently known as Ant Group, a fintech spin-off of Alibaba Group.
To calculate a credit rating, Sesame Credit uses transaction data from various platforms of Ant Group and Alibaba Group, such as e-commerce platforms Tmall and Taobao and mobile payment app Alipay. The data is translated into a score between 250 and 950. A high score a consumer gets access to certain free services, such as test drives in cars, waivering of deposits in hotels, etc. Mostly these perks relate to companies and merchants within Ant Group and Alibaba Group’s ecosystem.
Since financial capacity is an important aspect when looking for a partner, Sesame Credit was even integrated in various dating sites, so users could see their potential partner’s scores. (I wrote this Dutch article about Sesame Credit back in 2016).
In 2017 China’s central bank decided not to grant Sesame Credit, nor any of the other 7 candidates, a license to act as the (financial) credit rating system. Not only did it think the system collected an unnecessary amount of data, it also criticized the ‘conflict of interests’ of Sesame Credit, probably refering to purchases on Alibaba’s e-commerce websites and payments with Alipay driving higher scores.
Social management system: In 2014 the Chinese government announced that by 2020 it wanted to introduce an interdepartemental system able to assess and control the social behavior of citizens. Good behavior would be rewarded and bad behavior punished. A question that quickly arose among sceptics was whether this would be technically feasible given the large amounts of data and complexity of linking different databases of various government departments.
As with the eight financial credit systems that were developed, the social management system currently isn’t one single system, but consists of a central shared database and various experiments by local governments in more than 40 regions. Centrally, there are several ‘blacklists’, for example of people who fail to pay fines that were imposed on them in court, or tourists who seriously misbehave on flights or when travelling abroad. Such individuals may subsequently be restricted in certain freedoms. For example, misbehaving tourists might not be able to go on holiday abroad for a number of years. Individuals who fail to pay court-imposed fines and end up on a blacklist cannot use first-class trains or luxury hotels. The idea is that if you can afford these luxury services you should also be able to pay your fines. (I wrote a Dutch article about this social management system in 2016).
The goverment’s goal is for various government bodies to share data. Bad behavior in one sector can then lead to punishment in various other sectors. Are you not paying your court fines? Then you are no longer allowed to travel first class. That may sound strange to us because it can concern two unrelated things, but in China, where the government culturally is considered to have a parental role over citizens, it can be compared to our own upbringing. You’re not eating your vegetables? No TV tonight!
An important difference between Sesame Credit and the social management systems is that the social management system has (limited) rewards and punishments. Sesame Credit rewards people with high scores with various perks but has no punishments (unless you consider not getting those benefits a punishment). A system like Sesame Credit mainly shows how financially strong you are, while a social management system tries to steer government officials and departments, companies and citizens in moral and ethical behaviour.
This December 2015 video by Extra Credits, which was frequently shared and referenced at the time, is one of the culprits for a lot of confusion about the social credit system and is packed with factual inaccuracies and wild assumptions. The assumption at the beginning of the video that arch-rivals Alibaba and Tencent had created a credit system together should have been enough to ring alarm bells with anyone possessing the slightest of knowledge of the Chinese internet sector. But the most severe mistake the video made was to confuse Sesame Credit with the government’s social management system. Many people who watch the video at the time wouldn’t have noticed the comments below the video, where the creator received serious criticism for his assumptions and had to admit that there was a lot of discussion about how the system worked and he is not really sure how it worked himself.
Misconception 2: Alibaba shares data with the government for the social credit system
As indicated, there isn’t just one system and the two categories are (for now) not connected with each other. Chinese internet companies are obliged to provide data to the government if requested on the basis of legislation (e.g. domestic security), but there is no evidence that Alibaba shares large amounts of its data with the government. It is theoretically possible that the government requests the transactions of individuals (suspected of terrorism, activism, etc.) from companies like Alibaba, or that the government demands lists of buyers or sellers of a certain items. Think, for example, of counterfeit items that are found on the Taobao marketplace. But as far as we know, there is no automatic sharing of large amounts of data.
Although the government probably does not extract large amounts of data from Alibaba’s platforms on a structural basis (and Alibaba denies such rumors), it is said that Sesame Credit does make use of the blacklists of people who do not pay their court fines. The government provides this data to Ant Group, which lowers the Sesame Credit scores and blacklisted citizens are seemingly also blocked from buying luxury goods on Alibaba’s Tmall.
Incidentally, it is true that the government cannot set up a national social management system on its own and needs specialist ICT help for this. Such expertise must indeed be sought among the large internet companies, some of which, as we saw, have already set up (financial) credit rating systems similar to that of Sesame Credit. In 2015, Ant Group indicated in a press release that it wanted to help build a national social management system and Baidu has also been known to be called in by the government for the technical implementation. But in both cases there was no mention of data sharing.
Misconception 3: The social credit system is a points-based system
Alibaba’s Sesame Credit is a points-based system where a score is achieved and a user is even given suggestions to improve that score, e.g. by buying more on Alibaba platforms or completing their personal profile. But contrary to the persistent reports that every citizen in China is given a score by the government, Sesame Credit is not the social credit system and the social management system described above is not by definition points-based.
The central system and most experiments by local governments consist of blacklists rather than scoring systems. There are also experiments with ‘naming and shaming’ in which people who misbehave are pilloried in a modern technological way. For example, there is an experiment where you will hear a recorded message when you call someone who refuses to pay his or her fines. There is also an experiment in which pedestrians who regularly run a red light are identified by facial recognition and appear by name and photo on a notice board or have to collect a number of likes on social media for a report of their violation. All are based on the threat of loss of face when breaking the rules.
Other local pilots rate businesses in green, yellow or red colours based on their trustworthiness. This is comparable to a Chinese inspection system whereby restaurants in some regions are obliged to prominently display the results of a hygiene test in their businesses. A good result is accompanied by a happy green emoticon, a moderate result with a neutral yellow emoticon and a bad result with a sad red emoticon. [Addition 17/5/2022: A reader pointed out that the check for this system is performed by the Food and Drug Administration according to a checklist, in a manner similar to the star rating for a hotel. Some restaurants cannot get a green code because the items on the checklist are not present, such as e.g. separate ladies and gents toilet. A yellow or red result doesn’t always mean the quality or reliability is lacking.]
A few local governments have been experimenteing with points-based social credit systems. According to Foreign Policy, Rongcheng, in Shandong Province, is one of them. For now, it’s just that: a handful out of more than 40 local experiments, with no indication that the central government will be so impressed that they will be rolled out to the national system. It’s even highly unlikely. A decade ago the city of Suining, in Jiangsu province, already conducted a test with assigning citizens an actual score, giving penalty points for violations and bonus points for behavior of a model citizen. Based on the score, citizens were classified into categories A, B, C and D, with A citizens having the most privileges, like being allowed to join the communist party. That experiment was halted after criticism from both citizens and state media about the arbitrary nature of the system and the resemblance of a ‘good citizen certificate’ the Japanese used the hand out to well-behaving citizens during their occupation of the country.
In summary, there is currently no central points-based or score-based system and it is unlikely that there will ever be one, given the technical complexity and previous negative experiences. The common belief that the social management system gives every citizen a three-digit score is probably due to confusion with Sesame Credit and the fact that for natural and legal persons an ID number, not a score, will be used to link data from different sources.
Misconception 4: China’s social credit system is like that Nosedive episode of Black Mirror
In Nosedive, an episode of TV series Black Mirror, people constantly rate each other by giving reviews on a five-point scale. The average score of a citizen is adjusted on the spot and services provided by government and companies change depending on that score. Individuals with a low score are automatically stigmatized and the whole problematic system is heavily influenced by personal emotions. If someone got out of the wrong side of the bed, it is better to stay away from him or her, as is shown in the episode.
As you will understand by now, the social management system does not work this way. Sesame Credit may look a bit more like Nosedive due to the points-based system, but Sesame Credit is actually largely based on purchasing behavior and is therefore not very different from loyalty programs that also offer customers privileges. It’s comparable to frequent flyer programs in which you can get priority boarding and are allowed to enter the business lounge when you reach a certain membership level based on scores (which are based on purchased flight tickets).
It is true that an Alibaba employee once remarked that having friends with a high score can have a positive effect on your own score. That also the reason why the main character in Nosedive, Lacie Pound, goes to great lengths to attend a wedding. But even simply comparing Sesame Credit to Black Mirror is far too short-sighted.
And okay, I admit that I have been tempted to make the same comparison. At the request of a client, I also included a small reference to Nosedive in a presentation about digital innovation in China. Something I regretted afterwards, because this way I also contributed to the misunderstandings. Then again, even the biggest experts of social credit also got it wrong in the early years…
Others go much further in the comparison to Black Mirror. A news report that was broadcasted by Dutch public broadcasting company NOS was shockingly misleading. It claimed that in China every citizen is given a score and used the comparison with Nosedive. But it was also full of other untruths, claiming you would get penalty points if you weren’t kind to a dumpling seller or fellow passengers on the bus. That’s more than a direct comparison with Black Mirror, that’s presenting fiction as fact. Seemingly some media would rather present a juicy story than tell the reader the truth (something I would experience myself later).
Instead of comparing the Chinese social management system to Nosedive it would be more useful if we pondered what that Black Mirror episode was really about: the social pressure to ‘like’ everything and everyone on social media like Facebook, because otherwise others wouldn’t ‘like’ us anymore.
Misconception 5: This must be terrible for Chinese citizens!
People who have lived in China for some time or have close friends or in-laws in China can understand how a large part of the population might actually welcome a social management system. In recent decades, China’s economy has grown tremendously fast and society has changed dramatically. From a centrally planned economy with little financial incentive for entrepreneurship, China has developed into a place with much more freedom to start your own business. At the same time, China finds itself in what some call a “moral vacuum”. A strong ethical framework for what is right and wrong often seems to be lacking. (I have written several Dutch articles about this so-called moral crisis and published an English video of a lecture I did on the topic.)
In China, you may see plenty of people in Buddhist, Taoist and Confucian temples, but that is often just opportunistic behaviour; lighting three incense sticks and making a wish while bowing for a statue. Ask the average Chinese about the Buddha’s teachings and there will be few who can elaborate on them – just like most laymen in other Asian countries. Adhering to a religion or philosophy does not necessarily mean that you also follow or are even aware of the corresponding moral framework. Ironically, in China you might find the biggest crooks in business wearing Buddhist prayer bead bracelets.
In China’s booming economy, everyone wants a piece of the pie. And in the absence of a moral framework or lack of law enforcement, this piece of the pie isn’t always obtained in an honest manner. In the years I lived in China, there was a food safety scandal almost every week, with manufacturers knowingly selling life-threatening products. The melamine scandal from 2008 is perhaps the most infamous example of such food scandals. But there are also examples of schools promising valuable diplomas and running off with the money, brides for lonely single farmers who run off with the poor guy’s savings, people who sell a certain product but then deliver something of much lower quality, employers who don’t pay their staff, doctors who prescribe unnecessary medical treatments, webshops selling counterfeit goods and publishing fake reviews and ‘Black PR’ agencies that spread harmful rumors about individuals and businesses for a fee. All in all, a large part of Chinese society is unfortunately made up of lies and deceit. And almost everyone in society is regularly a victim of this.
In practice this means that a Chinese have a habitual distrust of strangers. The will to donate to charities and do voluntary work is often very low, even if one can easily afford a little time or money, unless there are big disasters like the 2008 Sichuan earthquake. People simply don’t have the confidence that their money or help will end up with those who need it. Within the network of guanxi, being friends, relatives and acquaintances and their friends’ relatives and acquaintances, people might still be willing to trust someone. But if there is no one who can vouch for a stranger, there will be a serious reluctance to do business. This is one of the reasons why online peer reviews of products, travel destinations, restaurants, etc are even more important in China than in the west. By definition, poor quality of products and services is assumed until proven otherwise.
An example of this near-paranoia occurred when my Chinese brother-in-law had a daughter. We decided to buy a baby stroller for him and his wife. The particular reputable brand they wanted was available on Chinese e-commerce platforms but both my wife and her brother insisted that we would buy it in The Netherlands. Even platforms like JD.com and Tmall that have fewer issues with counterfeits than Alibaba’s Taobao, were unacceptable to them. We ended up having to pay 60 euros for postage and my brother-in-law had to pay import duties and VAT, adding up to a price that was higher than what Tmall and JD charged on their websites. To my wife and her brother the extra costs were acceptable to minimize the – in my opinion very small – risk of buying unsafe counterfeit products.
The run on Dutch baby milk formula had its origin in the same paranoia; although the same Dutch products are for sale in China, people prefered them to be bought in a Dutch drugstore and mailed to China. And to be honest, I can’t blame them; China’s newspapers would regularly report on tampering with imported milk powder.
In itself, the situation in China might not be all that different from the periods full of scams that Europe and America also went through. But nowadays consumers in the west are mostly well-protected by laws. In the meantime, China is still a society where people habitually distrust each other and where laws and regulations, if they even exist, are often seen only as a ‘suggestion’ and enforcement of those rules leaves to be desired. The possibilities to get justice in court are often limited (especially if you thinking about sueing the government). In such a society a social management system, that basically is an enforcement tool for existing legislation, is seen not as a threat but as a solution. It helps citizens determine who is reliable and who is not.
Looking at the goals of the social credit system, as summarized by the Merics Institute in the table below, one of the main objectives of the government is to improve ‘social trust’ and honesty Chinese society.
Despite all the misunderstandings I discussed, western media got one thing right: the social management system will be used to keep citizens in line. The government is given even more power to direct the behavior of citizens and to shape the citizen into its ideal image. However, the social credit system does not contain any new laws and regulations, it is basically just a tool to make people follow existing rules more strictly. If you are looking for possible flaws, they might not be in the social credit system itself but in the laws it’s trying to enforce. Citizens can be blacklisted after a court ruling, but since the state and the legal system are not separated the government has a monopoly over the definition of what is good and bad. And if this would applied arbitrarily there is a danger of things turning out badly for individual citizens.
- Jeremy Daum’s article on the true meaning of the social credit system.
- Social Credit Overview Podcast – Jeremy Daum
- What’s the T on China’s Social Credit System? – Jeremy Daum Explains – Part 1 of 2 and Part 2 of 2
- Untrustworthy: Social Credit Isn’t What You Think It Is by Jeremy Daum
- China’s Social Credit System: Fact vs. Fiction, a video discussion with Jeremy Daum, Dai Xin and Vincent Brussee.
- Far From a Panopticon, Social Credit Focuses on Legal Violations – Jeremy Daum
- Why the law matters in China – Jeremy Daum on the Sinica Podcast
- Rogier Creemers VPRO podcast Futureshock (Dutch).
- Demystifying China’s social credit system – Rogier Creemers
- China’s Social Credit System: An Evolving Practice of Control – Rogier Creemers
- Open Sesame: Social Credit in China as Gate to Punitive Measures and Personal Perks – Manya Koetse
- Insights into the Social Credit System on Chinese Online Media vs Its Portrayal in Western Media – Manya Koetse
- Social Credit Watch, een uitgebreide en begrijpbare uitleg van het SCS door Trivium China.
- China Tech Talk 86: China’s social credit system — Everything you know is wrong with Kendra Schaefer (podcast)
- Simina Mistreanu’s nuanced article, Life Inside China’s Social Credit Laboratory, in Foreign Policy.
- Zheping Huang’s explanation of Sesame Credit (which is not part of the social credit system).
- A report van het Mercator Institute for China Studies about the status of local and central social management systems.
- Blacklists and redlists: How China’s Social Credit System actually works – Christopher Udemans, Technode
- China’s Social Credit Systems and Public Opinion: Explaining High Levels of Approval – Genia Kostka
- China’s Orwellian Social Credit Score Isn’t Real – Jamie Horsley, Foreign Policy
- The Real Story – China’s Big Social Experiment – BBC World Service podcast
- Into the Black Mirror: The Truth Behind China’s Social Credit System – Andrew Little, RADII
- Hi-tech dystopian plot or low-key incentive scheme? The complex reality of China’s social credit system – Nectar Gan, South China Morning Post
- The Messy Truth About Social Credit by Shazeda Ahmed
- The complex truth about China’s social credit scheme by Dr. Fei Shen, GovInsider
- China’s Social Credit System Is More Kafka Than Orwell by David Fickling, Bloomberg Opinion
- How the West got China’s social credit system wrong by Louise Matsakis, Wired
- What Western media got wrong about China’s social credit system (podcast), PRI
- Podcast: Reward and punishment – Inside China’s social credit system (Hertie School)
- Report: China’s Social Credit System – Leiden Asia Centre
- China’s Social Credit System Is Actually Quite Boring – Vincent Brussee, Foreign Policy
- People Don’t Understand China’s Social Credit, and These Memes Are Proof – Viola Zhou, Vice
- China’s social credit score – untangling myth from reality – Vincent Brussee (MERICS)