2020 Social Credit System: Why It Matters To Businesses

4 mins read.

WHAT IS IT: CHINA’S SOCIAL CREDIT SYSTEM (SCS)

If you have watched Charlie Brooker’s British dystopian science fiction anthology television series Black Mirror, it would not be difficult to grasp the concept of a social scoring system. The Black Mirror episode depicts a world where people can rate each other from one to five stars for every interaction they have, which can ultimately impact their socioeconomic status, and is designed to monitor and aimed at bringing about better individual and business behaviors. 

What most of use would perceive is that it could be a point-based system that award points to incentivize good behaviors such as volunteering and picking up litter and deduct points to punish bad behaviors. Yes, this essentially means jaywalkers, defiant tourists and no-shows at restaurants, airports and hotels can be identified with surveillance cameras via its facial recognition capability and data. 

If anyone were to equate this point-based system to China’s Social Credit System (SCS), then this is a huge misconception. In sum, the SCS is a multi-layer system to implement transparency of financial credibility and legal compliance for every resident and every organization (including government organizations) in China. It is a stretch to link this system to surveillance cameras and individual points for good behavior.

Photo credit: Taihu Credit Industry Alliance

WHAT TO EXPECT

China’s Social Credit System is pegged to be fully operational by 2020; however, the idea of social credit went all the way back in 1990s, while a national pilot started in 2014. Analysts indicated that 2020 will not be the year in which the system will be fully implemented but rather, it is the end of the initial planning period. The country can expect new policies this year, potentially in a five-year social credit plan.

Abacus elaborated that there are at least a dozen apps that allow users to search the court’s blacklist of “laolai,” or deadbeats, a derogatory term to describe people who have failed to fulfill court orders and repay debts. The Laolai Checker app allows a person to report a deadbeat.

Likewise, ABC News Australia featured the Deadbeat Map, a mini program accessible within Chinese social media platform WeChat that allows users to locate those who have failed to pay their debts within a 500-metre radius.

In the meantime, expect blockchain technology to be applied in China’s SCS. Asia Times states that Chinese experts presumably want to tap on the reliability and immutability of blockchain technology to make sure that social credit data is always accessible and cannot be changed by unauthorized persons.

MISCONCEPTIONS

Some may have misconceptions about the social credit system; especially with the critical negative coverage from the Western media. Wired.com drew parallels between China’s SCS and digital profiling in the US. They are really not that different from the psychographic advertising services provided by Google and Facebook catered to brands that want to reach out to their desired target segments.

The language barrier plays a huge role in this as well. The phrase “social credit (Mandarin: 社会信用),” has different connotations in English that it does in Chinese. To an English speaker, the two words combined refers to interpersonal relationships. On the other hand, in Chinese, the term is more closely associated with the phrase “public trust.”

OVERSEAS ADOPTION

In case you are wondering, the system is already being exported outside China. The Diplomat reported that it is a part of China’s Digital Silk Road, which is a piece of the Belt and Road Initiative, to expand information sharing and export Chinese technologies. 

Countries with weak legal systems find Beijing’s automated model of policing appealing. Back in October 2018, Saudi Arabia, Mongolia, Thailand and Myanmar were participating countries involved in building a credit information-sharing platform.  

The introduction of 5G will provide the necessary speed to support digitized governance. Networks of Chinese surveillance cameras are already emerging in Central Asia. China will also conduct a feasibility run for the SCS in Kazakhstan, Kyrgyzstan and Mongolia in 2020. 

WHY IT MATTERS TO BUSINESSES

According to China Briefing, the SCS is designed for three groups:
1) Citizens
2) Businesses and other organizations
3) Government officials

The National Development and Reform Commission (NDRC) confirmed it is pushing ahead with a corporate ranking system that will affect 33 million companies.

Due to that, businesses will be forced to be more law-abiding and think twice before making illegal moves. Sixth Tone reported that authorities in eastern China’s Wenzhou caught a pet products store owner selling veterinary drugs in October 2018 without a license. They issued him a fine of 10,000 yuan ($1,405) and added the company to an online government list of businesses recently cited for illegal activities.

WHAT TO LOOK OUT FOR

New Horizons outlined the process: First, the government submits data on businesses that is obtained through standard government inspections. Next, data is integrated into the monitoring system, which calculates a social credit rating for each business.  

A few factors can be considered in tabulating the score: 

  • Whether the business has paid taxes on time 
  • Whether the business maintains necessary licenses 
  • Whether the business fulfills environmental-protection requirements 
  • Whether the business meets product quality standards 
  • Whether the business meets requirements specific to their industry 

It is important to note that businesses’ scores may decrease based on the behaviors of partners too. If you are unsure of such details, seek assistance from a local expert who can ensure full compliance, increase scores and prevent blacklisting from happening. 

On a positive note, Roedl.com revealed that companies making contributions to the fight against COVID-19 such as the provision of medical staff or volunteers, as well as companies that manufacture or donate urgently needed medical devices (e.g. respiratory masks, electronic thermometers), have been granted rewards on their Social Credit Records.

CHALLENGES

Despite China’s ambitious plans in rolling out the SCS, it faces challenges as the uptake of localised versions differ. Apps such as My Nanjing, Xiamen’s Bailu Points and Fuzhou’s Moli have different rules for different cities. In one city, scores can range from zero to 200, but another city might award up to 1,000 points. According to Lewis, only five percent of the population in cities like Xiamen, bothered to download the app.

As the country continues to refine its plan, the social credit system remains and businesses will have to progressively update themselves with the latest developments and abide by the rules. Remember, the perks are great for companies with good behaviors.

2020 SCS? Think gamification for businesses, it is here to stay.