Government digitisation initiatives worldwide are infamous for budget overruns, delays and failures to deliver on promises. China is no exception. Hundreds of headlines worldwide have claimed that the Social Credit System will control every step of citizens’ lives. These narratives were rarely matched by the reality. The Social Credit System for the most part does not rely on scores, is digitally fragmented and highly incomplete, and focuses on economic rather than political or social activities.[1] But even the more limited iteration of the Social Credit System might be falling to problems that beset government IT projects worldwide: vague ambitions, too little funding, and institutional in-fighting.
A plan without a plan
China’s social credit experiments date back twenty-five years, when authorities and businesses sought solutions to problems like counterfeit products flooding the market, triangular debts – where A loans money to B, B loans to C, and C loans to A, creating a deadlock of bad debts threatening the stability of the financial system – and widespread disregard for the country’s laws and regulations. Subsequently, the central government and dozens of ministries spent decades trying to establish data-sharing systems across traditionally fragmented government units, alongside blacklists to punish severe lawbreakers and incentives to promote ‘trustworthy’ behaviour. In 2011, the then premier Wen Jiabao commented that ‘good “social credit” 社会信用 is a necessary condition for every enterprise, institution and individual to gain a foothold in society’ but lamented rampant ‘commercial fraud, counterfeiting, false reporting, and academic misconduct’.[2]
The Social Credit System that emerged was not merely concerned with financial credit. Its focus was on regulatory compliance, or the ‘credibility’ of enterprises. The term ‘social’ 社会 did not refer to interpersonal behaviour as it commonly does in the English language. Rather, it was meant to distinguish it from a ‘national credit system’, which was the name for the system that was originally envisaged. Changing ‘national’ to ‘social’ in 2002 emphasised that the system was not to be built by the government but by ‘society’. Finally, the Social Credit System was never intended to become a fully integrated system. At best, it is a fragmented collection of different systems that typically share little more than the aim of enforcing compliance with laws and regulations.
Whether the Social Credit System has had its desired effect remains in doubt. None of the many plans issued over the years answered the fundamental question: what is social credit, and what is its ultimate goal? In 2019, this led to researchers asking local officials in China what the Social Credit System was to them, only to have the officials ask the same of them: ‘I really can’t figure it out. Is it possible that you scholars can tell me?’[3]
Experiments were being carried out in almost every domain, yet shared understanding was completely lacking. Starting in the early 2010s, some localities experimented with scoring citizens on such criteria as whether they quarrelled with neighbours or set off fireworks during prohibited times, with the scoring being done by volunteers, not artificial intelligence (AI).[4] Others developed local initiatives to crack down on people eating on the subway, enforced by local subway officers.[5] During the COVID-19 pandemic, some cities blacklisted citizens for refusing to wear a mask or get tested.[6] These were all labelled as part of the Social Credit System but in practice were rarely integrated or expanded widely.
Private companies were experimenting, too. Alibaba’s subsidiary Ant Financial developed Sesame Credit 芝麻信用 in 2015. Its aim was to find alternative ways of assigning financial credit scores, as most citizens in China still did not have credit cards or extensive credit records to draw from. Sesame Credit used big data, monitoring citizens’ shopping habits, and turning this into a three-digit score. One of Ant Financial’s executives suggested that people buying beer could be seen as less ‘trustworthy’ than those buying nappies or that playing online games could lower one’s score. Users’ scores were also affected by their friends: 5 percent of one’s Sesame Credit Score was the aggregate of scores in one’s network. Unfortunately for Ant, however, China’s central bank, the People’s Bank of China, ultimately did not approve of the scheme, in which Alibaba simultaneously acted as credit assessor, supplier of loans, payment service provider, and the marketplace. Sesame Credit rewarded people for shopping with Alibaba but was not an effective credit-scoring system. In 2017, the bank denied Sesame Credit an official credit licence.[7] Sesame Credit still exists today but fulfils little meaningful function and remains fully voluntary to use.
Such initiatives remained at the fringes of the system. The real thrust of the system was the enforcement of regulatory compliance. Authorities across China set up blacklists for individuals and companies who committed severe violations of laws and regulations in the market economy. Such violations included fraud, illegally dumping pollutants in bodies of water, producing substandard medicine and more. Regulators could manually add violators to blacklists, which they planned to share with all government bodies and with the public online. At least ten million citizens currently find themselves on one of such blacklists. The consequences are severe: depending on the blacklist, some cannot travel by plane or high-speed rail, and others might see their government subsidies, professional qualifications or loans cancelled. Because the emphasis has been placed on penalising lawbreakers, it took central authorities twenty years (until 2019) before they seriously encouraged ‘credit repair’, the process of allowing people or entities to apply for removal from the blacklist, establishing a process of credit repair in the annual evaluation of cities that had hosted pilot social credit systems.[8]
There was no grand masterplan. The vague nature of the Social Credit System grand experiment let local authorities essentially do as they wished.[9] Few of them were concerned with whether these actions were proportional, at all related to ‘credit’, or commensurate with Xi Jinping’s ‘law-based governance’. This is commonplace in Chinese policy-making, where central authorities frequently create the contours of policy and let local officials work out the details, learning from their mistakes and successes. But the Social Credit System took it to another level by attempting to cover an extensive range of problems involving an even more extensive range of agencies – each bringing their own interests to the table. Moreover, digitisation initiatives require standardisation. Without uniform standards on questions of what data to gather and how to format or process it, it is impossible to weave fragmented initiatives into one coherent whole.
Social credit is dead
These problems led to severe backlash from China’s legal community, who criticised the overgeneralised concept of ‘credit’. They argued that ‘credit’ should remain a financial or compliance-related concept with very little relationship to social behaviour or minor transgressions like eating on the subway. They criticised the blacklists for unjustifiably restricting citizens’ rights.[10] In 2019, China’s chief economic planning body, the National Development and Reform Commission (NDRC), ordered that local points systems could only be used for incentives, not for penalties.[11] During the COVID-19 pandemic, criticism of the scheme increased, as many local governments began using it for such things as enforcing mask-wearing.[12] Another problem was that companies were suddenly at risk of being blacklisted over noncompliance with contracts and loan repayments due to lockdowns. At the end of 2020, the central government launched a regulatory crackdown on the experiments, clarifying that blacklisting is only appropriate for severe violations of laws and regulations.[13] Local governments that did not comply would see their pilots abolished. In the years that followed, most of the aforementioned experiments were cancelled or quietly abandoned.
Today, the Social Credit System finds itself stuck in purgatory. Rongcheng 荣成市, a small county and China’s ‘ground zero’ of mandatory citizen-scoring experiments in Shandong Province, made participation in its scheme fully voluntary and strictly reduced the types of behaviour covered by it.[14] In 2024, when German journalists visited the town, they found that no one cared any more about collecting points.
Central authorities and ministries released fewer new policy documents on the Social Credit System in 2023 than in any year since 2014 – the year large-scale experimentation started. After decades of work, authorities still have not perfected basic data infrastructures. Information collected under one scheme is still not appropriately shared with other government organs and platforms.[15]
In late 2022, the NDRC released a draft Social Credit Law for public comments. China’s government typically passes laws relatively quickly after the public comment period ends, but not in this case. The draft raised more questions about the core aims and approaches of the system than it answered.[16] It did not clarify any concepts or concrete goals, only restating vague ambitions to establish the system in key sectors such as food and medicine production. It seemed as if the NDRC simply canvassed all government bodies for their thoughts and copied and pasted them into one document. It failed to do the things a law is supposed to do, and the Social Credit Law disappeared from public view for two full years.
Long live social credit?
In part as the result of the regulatory crackdown, in part because of continuing uncertainty about the system’s core aims, China’s Social Credit System as we know it might be dying. Still, some more focused elements of the system continue to be implemented and developed. The so-called ‘judgment defaulter’ blacklist 失信被执行人名单 is one example. This blacklist, which targets people who have an outstanding court order against them yet refuse to obey its measures, currently includes approximately nine million citizens. As it is managed by a single institution with a clear remit – the Supreme People’s Court – it does not face the hurdles of coordination and troublesome legal definitions plaguing other elements of the system.
Similarly, in the financial domain, the People’s Bank of China established its Credit Reference Centre many years ago and continues to build on it. This centre is dedicated to collecting financial information on citizens and companies (i.e. records of lending and spending) and provides it to lenders to assess potential financial risk. The central bank is also invested in a joint venture called Baihang 百行征信, co-founded with China’s tech giants, through which it attempts to coerce tech companies and commercial banks to pool data for more effective credit reporting. Although these initiatives are sometimes labelled part of social credit, they remain principally financial – not unlike credit institutions in other developed economies.
Finally, efforts in the regulatory domain are shifting towards an initiative called credit risk management 信用风险监管. The most important new initiative under this banner is the aggregation of regulatory data to create a risk index for companies. This index covers two elements: the likelihood that a company might violate laws and regulations, and the likelihood that this violation would cause severe harm to the market economy. For instance, a classical music company does not pose a particularly high risk to the market, even if it ignores all regulations, whereas small violations in a plant producing medicine could have disastrous consequences. Outcomes will be used to determine the number of random inspections to which a company is subject but will not be tied to formal punishments. One official at China’s Ministry of Transport recently recommended that this is where the weight of Social Credit System development should be.[17]
These initiatives are not without their problems. In some experiments with the credit risk index, authorities have sought to use social media discussions of a company as an indicator of its credit risk. Social media comments can easily be manipulated by competitors and other actors for various reasons. Other experiments have used the age of the company’s legal representative as a proxy for risk, with relative youth linked to higher risk. In other words, age discrimination is a feature, not a bug, in some local experiments. The Supreme People’s Court’s blacklist for judgment defaulters also features severe penalties with little regard for proportionality: some companies were blacklisted for defaulting on a fine of just RMB 500, and their executives were banned from travelling by plane or leaving the country.
Conclusion
Some parts of the Chinese government see the Social Credit System as the solution to many problems. The courts have lauded how the Social Credit System has helped them recover billions from judgment defaulters. The NDRC, perhaps as an act of self-promotion, claimed that the system has improved the business environment by reducing ‘bad credit events’. After two years of silence, in June 2024, the NDRC released a new action plan.[18] One of its goals is finally to move ahead with the long-delayed Law on the Establishment of the Social Credit System. Another target in the plan is to continue working on points incentives for citizens.
They have not yet resolved what ‘social credit’ actually means. Without consensus on this fundamental question, laws will have to wait. And without legal clarity, it is difficult to picture local authorities being eager to invest scarce resources in an ambiguous and controversial initiative. The plans might be little more than the dying breaths of the Social Credit System, at least as we know it.
Notes
[1] Vincent Brussee, ‘China’s social credit score – untangling myth from reality’, MERICS, 11 February 2022, online at: https://www.merics.org/en/opinion/chinas-social-credit-score-untangling-myth-reality
[2] General Office of the State Council, ‘Wen Jiabao chaired a meeting of the State Council Standing Committee to develop and deploy the planning of the Social Credit System’ [温家宝主持召开国务院常务会议部署制订社会信用体系建设规划], 19 October 2011, online at: https://www.miit.gov.cn/xwdt/szyw/art/2020/art_b3248b53edb34d4781e5e7c492cce1d3.html.
[3] Wen-Hsuan Tsai, Hsin-Hsien Wang and Ruihua Lin, ‘Hobbling Big Brother: Top-level design and local discretion in China’s Social Credit System’, China Journal, no. 86 (2021): 1–20.
[4] China Law Translate, ‘Rongcheng municipal credit assessment standards’, 3 February 2019, online at: https://www.chinalawtranslate.com/en/rongcheng-municipal-personal-credit-appraisal-standards/. Note: these regulations have been abolished since.
[5] Xinhua, ‘“Untrustworthy in one place, restricted everywhere” – Where is the boundary of credit punishment?’ [“一处失信，处处受限” – 信用惩戒的边界在哪里”], 12 September 2020, online at: https://web.archive.org/web/20220910115006/http://www.xinhuanet.com/legal/2020-09/12/c_1126484391.htm
[6] Xinhua, ‘Not wearing a mask in public places counts as untrustworthiness? The Social Credit System must prevent abuse’ [公共场所不戴口罩算失信？社会信用制度要防滥用], 22 March 2020, online at: https://web.archive.org/web/20220807170829/http://m.cnhubei.com/content/2020-03/22/content_12883173.html
[7] Rogier Creemers, ‘China’s Social Credit System: An evolving practice of control’, SSRN Open Access, 2018.
[8] Vincent Brussee, Social Credit: The Warring States of China’s Emerging Data Empire, Singapore: Palgrave Macmillan, 2023, chapters 5–6.
[9] Rachel Cheung, ‘The grand experiment’, Wire China, 17 December 2023, online at: https://www.thewirechina.com/2023/12/17/the-grand-experiment-social-credit-china/
[10] Kui Shen, ‘The road to the rule of law in the construction of the Social Credit System’ [社会信用体系建设的法治之道], China Legal Science 2019, no. 05 (2019), online at: https://web.archive.org/web/20220910115025/http://fzzfyjy.cupl.edu.cn/info/1035/11343.htm
[11] ‘National Development and Reform Commission: Personal credit scores can be used to give rewards for integrity, but cannot be used for punishment’ [发改委：个人信用分可以结合守信激励 但不能用于惩戒], China News, 19 July 2019, online at: https://web.archive.org/web/20220807183035/https://www.creditchina.gov.cn/gerenxinyong/gerenxinyongliebiao/201907/t20190719_162509.html
[12] Xinhua, ‘Not wearing a mask in public places counts as untrustworthiness?’ [公共场所不戴口罩算失信？社会信用制度要防滥用].
[13] General Office of the State Council, ‘Guiding opinions on further improving systems for restraining the untrustworthy and building mechanisms for building creditworthiness that have longterm effect’, trans. China Law Translate, 7 December 2020, online at: https://www.chinalawtranslate.com/en/%e5%85%b3%e4%ba%8e%e8%bf%9b%e4%b8%80%e6%ad%a5%e5%ae%8c%e5%96%84%e5%a4%b1%e4%bf%a1%e7%ba%a6%e6%9d%9f%e5%88%b6%e5%ba%a6%e6%9e%84%e5%bb%ba%e8%af%9a%e4%bf%a1%e5%bb%ba%e8%ae%be%e9%95%bf%e6%95%88%e6%9c%ba/
[14] Rongcheng People’s Government, ‘Rongcheng municipal measures on the management of personal integrity scores’ [荣成市个人诚信积分管理办法], trans. China Law Translate, 13 June 2022, online at: https://www.chinalawtranslate.com/18133-2/
[15] Kendra Schaefer, ‘China’s corporate Social Credit System: Context, competition, technology and geopolitics’, Trivium Social Credit, 12 August 2020, online at: https://www.uscc.gov/research/chinas-corporate-social-credit-system-context-competition-technology-and-geopolitics
[16] Jeremy Daum, ‘“Franken-law”: Initial thoughts on the draft social credit law’, China Law Translate (blog), 15 November 2022, online at: https://www.chinalawtranslate.com/franken-law-initial-thoughts-on-the-draft-social-credit-law/
[17] Yiyin Liang, ‘Research on the legislative ideas of transportation credit under social credit legal disputes’ [社会信用法律争议下的交通运输信用立法思路研究], Pearl River Water Transport珠江水运, no. 3 (2024): 21–4.
[18] General Office of the National Development and Reform Commission, ‘2024–2025 Action Plan for the Establishment of the Social Credit System’, trans. Jeremy Daum, 4 June 2024, online at: https://www.chinalawtranslate.com/en/2024-2025social-credit-plan/
