Saturday

21st Sep 2019

Stakeholder

The truth and reality of China's social credit system

  • China needs not only to rely on traditional means of bank credit investigation, but also the Internet and big data. (Photo: SimonQ)

To address the long-term problems in the development of market economy and adapt to the digital age, China is working to build an advanced social credit system.

This has attracted both praise and skepticism from the Western media.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • The punishments include preventing the defaulter from taking up certain jobs or posts (Photo: MyTudut)

While such media attention is understandable given the increasing influence of China, it should be noted that due to the uniqueness of China's market economy and the complexity of its social system, any objective and fair discussion and judgment must be based on a full understanding of the reality in China and the history of its credit system, otherwise they would be superficial or even biased.

China builds a social credit system for problem-solving and governance innovation

In 2014, the Chinese government drew up the Outline for Building a Social Credit System. Drawing upon proven practices in western countries, it developed a social credit system suitable for China's national condition with the aim of solving problems in the development of market economy and fostering innovations in social governance.

Since the establishment of China's socialist market economy in 1978, substantial progress has been made but some problems have emerged. These include tax evasion, industrial accidents, counterfeit consumer goods, food and drug hazards, economic and academic frauds, and other problems which undermine trust between citizens, between consumers and businesses (producers and sellers), and adversely affect the government integrity to some extent.

To solve these problems, the Outline of the 12th Five-Year Plan formulated and implemented by the government in 2011 put forward the idea of building a social credit system.

As its social credit system was introduced only lately, China has been able to make full use of the experience of developed economies.

A number of scholars and officials were sent to Europe, the United States, Japan and other countries for study and research. They were particularly interested in the central bank model or public management model of France, Spain and other European countries.

The Chinese government regards the development of the social credit system not only as a solution to problems in the market economy, but also as an important part of the efforts to modernise governance capacity.

As can be seen from the Outline, "social management" was replaced by "social governance", and the government's role was explained as the "supervisor" rather than "manager".

These changes indicate that China's social credit system has been designed to promote open and inclusive social governance, to involve more actors in the process of social governance, and to boost social governance efficiency while promoting healthy competition in Chinese market economy.

China builds a social credit system for advancing the rule of law

China's social credit system is built in an era of free movement of people and booming digital economy, in a fast-changing environment that is more complex than what western countries had to deal with when they established their own systems.

The challenges ahead are thus much greater. For instance, due to the diverse sources of credit rating data, to establish a sound credit evaluation system and adapt to the trend of "credit digitisation", China needs not only to rely on traditional means of bank credit investigation, but also the Internet and big data.

The Baihang Credit System was thus launched by the National Internet Finance Association – a self-regulatory organisation – in partnership with eight market-oriented entities including Zhima Credit and Tencent Credit. Its purpose is to tackle the inadequacies of the bank credit investigation system in personal credit information through credit information in the field of Internet lending.

Private credit rating companies, such as Zhima Credit, belong to an independent commercial social credit system. Associated with Alipay, which belongs to Alibaba Group, it takes daily consumption behaviors, social groups and credit histories into consideration in evaluating personal credit.

Therefore, China's social credit evaluation system is a product of cooperation between the government and society rather than an omnipotent tool for the government to take firm control.

Some foreign media organisations selectively focused on China expanding the scope of credit investigation and imposing "punishment" on citizens or institutions with poor credit records through the social credit system, "fearing" that the process will "undermine the rule of law and infringe on human rights".

The social credit system, by "rewarding honesty and punishing dishonesty", facilitates the healthy operation of market economy and provides indispensable intermediary services in every mature economy.

The actual situation in China is that the social credit system mainly aims at the prominent problems in the market, such as violation of laws and regulations, dishonouring contracts and commitments.

Based on the credit rating of the west, the social credit system expands its scope to four fields, namely government affairs credit, business credit, social credit and judicial credit. Under the social credit system, the punishment for dishonesty must be meted out within the legal scope, and there is no such phenomenon as "continuously monitoring citizens' economic and non-economic behaviors" and "extra-judicial enforcement".

Currently, China takes the list of dishonest people released by the Supreme People's Court and punishment for serious dishonest acts in transportation as the two main tools to punish dishonesty, which do not go beyond the scope of laws, and compliance with laws is the fundamental basis for the punishments.

The government document issued in 2016 clearly stipulated the four key areas for joint punishment of dishonest behaviours: food and drug safety incidents; bribery, tax evasion and fraud, and seriously undermining the order in cyberspace communication; refusal to comply with a judicial or administrative ruling despite the ability of doing so; and evading military service.

The punishments include preventing the defaulter from taking up certain jobs or posts, and the well-known ban on luxury items, high-speed rail and air tickets, and all these punishments are based on existing laws rather than new ones.

So far, there has been no evidence that an individual's social behaviour, consumption habits and political beliefs affect his or her credit, let alone justifying punishment. Foreign media organisations should respect this fact.

China's credit system conforms with the trend of times and made considerable strides

Since the Outline was implemented nearly five years ago, China's public credit system and market credit system have supplemented each other and formed a benign interaction. According to the Doing Business 2019 report released by the World Bank early this year, China's environment of doing business jumped from 78th to 46th in a year.

Reform measures including building the social credit system are important reasons for the growing vitality of the market and the greater efficiency in market regulation.

The public credit investigation system is led by the government and central bank in such countries as Germany, France, Italy, Spain, Austria, Portugal and Belgium.

Similarly, the Chinese government, as the public power, plays the role of organisation, guidance, promotion and demonstration in the social credit system: On the one hand, through strengthened efforts in government transparency and the fight against corruption, the government increases its credibility and improves the governance; on the other hand, it guides the activities of promoting business integrity in production, circulation, finance and other fields and ensures such activities meet the standards, and urges private credit rating companies to protect user information and reduce the risk of information asymmetry and the cost of information collection.

It needs to be noted, however, that China's social credit system is still in the process of continuous exploration and improvement.

For example, there is an imbalance between the development of the public credit mechanism and of the market credit mechanism. The operation of the complex and huge system still faces many technical challenges. Awareness of personal data and privacy protection needs to be raised and measures need to be strengthened.

Now, continuous efforts are required to adapt China's social credit system to the changing environment, and also to learn from the experience of developed countries and step up international cooperation.

In the digital age, to update and improve the credit system is a common task for all countries. Only by establishing an adaptive and continuously improving social credit system can we better safeguard the economic order, tap growth potential and promote social governance.

Thus, the international community's attitude to China's efforts should be optimistic and willing to strengthen exchanges to learn from each other.

All the concerns and doubts about China's social credit system will eventually be cleared up by facts. The few groundless accusations that try to label it as an "Orwellian system" are false statements against common sense and full of prejudice, which are not worth refuting.

Author bio

Fan Zhengjie is a research assistant and Zhang Bei is an assistant research fellow at the China Institute of International Studies.

Disclaimer

This article is sponsored by a third party. All opinions in this article reflect the views of the author and not of EUobserver.

Opinion

EU's internal dynamics must be part of 'China' debate

Europe has to come to grips with the fact that the balance of opportunities and challenges presented by China differs profoundly between EU member states, be that Greece, Italy, Luxembourg or Germany.

MEPs back cap on credit card fees

MEPs have backed plans to cap card payment fees charged to shops by credit card giants Mastercard and Visa in a move aimed at saving €6 billion per year.

Transforming the EU's response to forced displacement

Only through joining up external policies to ensure no one is left behind, establishing a humane and predictable asylum system, and recognising humanitarian emergencies are a political emergency, can the EU champion the humanitarian response globally.

News in Brief

  1. Ireland: right Brexit deal is 'not yet close'
  2. UK secrecy on Brexit holds back wider EU talks
  3. Feminist mass protest in Spain after 19 murders this summer
  4. Global climate strike starts ahead of UN summit
  5. UK Brexit minister to meet Barnier on Friday
  6. Russia-Ukraine gas deal talks show 'progress'
  7. Nobel economist: Ireland 'not good EU citizen' on taxes
  8. Germany takes carbon border tax on board

Stakeholders' Views

This EUobserver section provides a platform for EU stakeholders to communicate positions, views and activities.

Stakeholders' Highlights

  1. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  2. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  3. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  4. Nordic Council of MinistersNo evidence that social media are harmful to young people
  5. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  6. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  7. Nordic Council of MinistersEducation gets refugees into work
  8. Counter BalanceSign the petition to help reform the EU’s Bank
  9. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  10. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  11. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  12. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat

Latest News

  1. Europe goes to New York This WEEK
  2. Nine EU 'commissioners' asked to clarify declarations
  3. Dismiss Italy's Salvini at your peril
  4. Malta PM accused of 'blackmail' over slain reporter
  5. Diplomats back Romania's Kovesi for EU top prosecutor
  6. Brexit raises questions for EU defence integration
  7. Low-carbon cities can unlock €21tn by 2050, report finds
  8. France, Italy want 'automatic' distribution of migrants

Stakeholders' Highlights

  1. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  2. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  3. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  4. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  5. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  6. Nordic Council of MinistersNordic commitment to driving global gender equality
  7. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  8. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  9. Nordic Council of MinistersNordic talks on parental leave at the UN
  10. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  11. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  12. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID

Stakeholders' Highlights

  1. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  2. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  3. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  4. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  5. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  6. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  7. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  8. Nordic Council of MinistersSeminar on disability and user involvement
  9. Nordic Council of MinistersInternational appetite for Nordic food policies
  10. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  11. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  12. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”

Join EUobserver

Support quality EU news

Join us