China’s Dystopian Social Credit System

China is developing a national reputation system that aims to monitor, shape and rate the behaviour of its 1.4 billion citizens. The system, known as the Social Credit System (SCS), is an ambitious project of the Chinese Communist Party (CCP) that combines big data, artificial intelligence and surveillance to create a mechanism of social control.

The SCS is not a single, unified system, but rather a collection of different initiatives and experiments by various government agencies, local authorities and private companies. The SCS has two main components: a social credit system for individuals and a corporate social credit system for businesses.

The social credit system for individuals assigns a score to each citizen based on their compliance with the law, their moral conduct, their social contribution and their loyalty to the CCP. The score can be affected by various factors, such as paying taxes, obeying traffic rules, donating blood, recycling, helping the elderly, spreading positive messages online, or criticizing the government, among others.

The score can have various consequences for the citizens, such as rewards or punishments. Rewards can include easier access to loans, discounts on public services, better employment opportunities, or preferential treatment in education and health care. Punishments can include fines, restrictions on travel, lower internet speeds, exclusion from certain jobs, public shaming, or even imprisonment.

The corporate social credit system for businesses evaluates the performance and compliance of all companies operating in China based on a wide range of criteria, such as tax payments, environmental protection, product quality, labour rights, market competition, and national security. The system also monitors the behaviour of the companies’ employees, suppliers, customers and partners.

The system can have various consequences for the businesses, such as rewards or punishments. Rewards can include easier access to credit, lower tax rates, preferential bidding, or market access. Punishments can include higher tax rates, increased inspections, reduced subsidies, restricted market access, blacklisting, or even closure.

The corporate social credit system (CSCS) is a tool that allows the CCP to exert more control and influence over the large corporates in China, especially those in the fintech sector. The CSCS evaluates and rates the performance and compliance of all companies operating in China based on various criteria, such as tax payments, environmental protection, product quality, labour rights, market competition, and national security. The CSCS can reward or punish the companies based on their scores, affecting their access to credit, subsidies, market opportunities, and regulatory scrutiny. The CSCS can also monitor the behaviour of the companies’ employees, suppliers, customers and partners, creating a network of surveillance and pressure.

The Example of Ant Group and Jack Ma

One example of how the CSCS can be used to take funds from large corporates and to keep them in their place is the case of Jack Ma and his Ant Group. Ant Group is the largest fintech company in China, providing online payment, lending, investment, and insurance services to hundreds of millions of users through its Alipay platform. Ant Group was founded by Jack Ma, who is also the co-founder of Alibaba Group, one of the world’s largest e-commerce and tech giants. Jack Ma is known for his flamboyant and outspoken personality, and has often clashed with the Chinese regulators over his business practices and views.

In October 2020, Jack Ma delivered a speech in Shanghai, where he criticized the Chinese financial system and regulators, accusing them of stifling innovation and being too risk-averse. Shortly after the speech, the Chinese authorities halted Ant Group’s planned initial public offering (IPO), which was expected to be the world’s largest, raising $37 billion and valuing the company at $316 billion. The regulators also launched an investigation into Ant Group and Alibaba Group, accusing them of violating anti-monopoly and anti-trust laws, abusing their market power, and endangering the financial stability and security of the country.

As a result of the regulatory crackdown, Ant Group was forced to undergo a sweeping restructuring, which required it to become a financial holding company subject to stricter supervision and capital requirements, to cut the links between its payment and lending businesses, and to share its user data with the authorities. Ant Group also had to pay a fine of $2.8 billion for its monopoly practices, and to halt its expansion plans in China and abroad. Ant Group’s valuation has dropped by at least $70 billion since its scuttled IPO, and its growth prospects have been severely diminished. Jack Ma, meanwhile, has largely disappeared from public view, and has reportedly stepped down from his role as Ant Group’s chairman.

The CSCS, therefore, has enabled the CCP to take a large amount of funds from Ant Group and its shareholders, and to keep Ant Group and Jack Ma in their place, by imposing harsh penalties and restrictions on their business activities and personal freedoms. The CSCS has also sent a clear message to other large corporates and fintech companies in China, that they must comply with the CCP’s rules and regulations, and not challenge its authority and interests. The CSCS has thus become a powerful instrument for the CCP to maintain its control and influence over the economy and the society in China.

Early Stages

The SCS is still in its early stages of development and implementation, and faces many challenges and uncertainties. The system lacks a clear legal framework, a consistent methodology, a transparent mechanism, and a reliable database. The system also raises serious ethical, social and human rights concerns, such as privacy, consent, fairness, accountability, and trust.

The SCS was announced in 2014 and was expected to become fully operational and mandatory for all citizens and businesses by 2020, according to the CCP’s plan. However, as of 2023 the system has not been fully implemented. This is probably due to tech issues with automating data collection and setting up algorithms to administer rewards and punishments.

Why are the Chinese Communist Party Doing This?

The system is intended to enhance the CCP’s governance capacity, legitimacy and stability, as well as to promote the CCP’s vision of a “harmonious socialist society” under the leadership of President Xi Jinping. However, the system also poses significant risks and challenges for the CCP, as well as for the Chinese society and the international community.

The SCS could have a significant impact on the economy of China, the unity of the Chinese public and the political stability of the CCP. On the one hand, the SCS could improve the efficiency, transparency and trustworthiness of the market, the government and the society, by incentivizing good behaviour and deterring bad behaviour. The SCS could also foster a culture of honesty, integrity and responsibility, as well as a sense of belonging and identity among the Chinese people. The SCS could also strengthen the CCP’s authority, legitimacy and popularity, by enhancing its ability to deliver public goods, enforce laws and regulations, and maintain social order and harmony.

On the other hand, the SCS could also have negative consequences for the economy, the society and the politics of China. The SCS could create a system of surveillance, manipulation and coercion, that violates the privacy, autonomy and dignity of the citizens and the businesses. The SCS could also generate a culture of fear, conformity and opportunism, as well as a sense of alienation and resentment among the Chinese people. The SCS could also undermine the CCP’s credibility, accountability and adaptability, by exposing its flaws, biases and errors, and by provoking resistance and backlash from the public and the international community.

Clinging to Power?

The SCS could be seen as an indication that the CCP is worried about its ability to maintain one-party rule in the country, as it faces various challenges and pressures from within and without. The SCS could be a response to the growing social and economic inequalities, the rising public demands and expectations, the increasing corruption and misconduct, and the emerging social and environmental problems in China. The SCS could also be a reaction to the changing global and regional environment, the intensifying strategic competition and rivalry, the expanding international norms and standards, and the evolving opportunities and threats for China.

In Conclusion

The SCS is a complex and controversial system that reflects the CCP’s attempt to balance the contradictions and tensions between its political ideology and its economic reality. The SCS is designed to create a socialist society with Chinese characteristics, where the citizens and the businesses are loyal, obedient and harmonious, and where the CCP is the supreme leader and guardian. However, the SCS also reveals the inherent flaws and challenges in trying to create a socialist country using a form of free market capitalism as its economic driver. The SCS exposes the trade-offs and conflicts between the CCP’s goals of economic growth, social stability, and political control, and the people’s aspirations for freedom, justice, and prosperity. The SCS also raises questions and concerns about the sustainability and legitimacy of the CCP’s rule, as well as the implications and impacts of the SCS for the rest of the world.