Discipline and Punish: The Birth of China’s Social-Credit System

Discipline and Punish: The Birth of China’s Social-Credit System

Discipline and Punish: The Birth of China’s Social-Credit System

In Hangzhou and throughout Shandong province, gold stars and black marks have begun to shape public and private behavior.


We were near the entrance of the No. 1 People’s Hospital of Hangzhou in Zhejiang province, southwest of Shanghai. An old woman who seemed to be waiting for a taxi suddenly climbed over the roadside barrier, leaned over the hood of a German car, jumped up, then sat down on the ground, arms crossed. The frantic young driver got out and went up to her. They argued for an hour in front of nurses and a passing policeman until they agreed on damages.

Chinese online video platforms show many incidents of peng ci (touching porcelain), where people fling themselves onto cars to claim damages. They can be funny; more often, they’re dramatic. These extortions—plus scams in health, food, and counterfeit goods—make people angry and help explain why they are prepared to accept any government measures that claim to end them.

The most important measure is the new “social credit” surveillance system. Since last summer, words like honesty (cheng) and credibility (xin) have appeared on propaganda posters that accompany a growing panoply of public and private mechanisms that assess individuals, officials, businesses, and professional sectors and reward the good and punish the bad.

Lin Junyue, a researcher from Beijing, has worked on such a system since 1999, when he was appointed chief engineer for a new team set up at the request of then–Prime Minister Zhu Rongji. Lin said: “American companies asked Zhu to create tools to provide them with more information on the Chinese companies they wanted to work with. I made several study trips to the US with my colleagues and we realized that we had to create something even better: a solid system for documenting the creditworthiness of Chinese citizens and enterprises. Our report ‘Towards a National System of Credit Management’ came out in March 2000, just before the two national assemblies were held. The term ‘social credit’ followed in 2002, when an official suggested a lexical symmetry with social security.”

In 2006 the central People’s Bank of China adopted the credit-scoring principle, which, like its US counterpart, uses a rating of 300 (very poor) to 850 (excellent). Lin said, “We wanted to explore credit in the broadest possible sense by gathering a far greater amount of information, for instance from the ministry of state security or ministry of industry and information technology. That project was ratified by the national development and reform commission in 2012.”

Lin rejects any comparison with the episode of the British television series Black Mirror in which society is controlled by social-credit rating. He refutes the idea of nationwide individual notation. “We’re not doing that, even though we do go further than the standard solvency assessment. All kinds of data are gathered over time about a given individual or organization. What that does, thanks to new criteria, is to enable exemplary individuals or businesses with no economic history to have access to credit, calls for tenders, and much else.”

The system is being tested until 2020 by 43 municipalities, each with its own criteria, system of letters or points, and name: In Suzhou it is called Plum Blossom Social Credit; in Xiamen, Jasmine. Nearly all use data from social networks or smartphone apps, besides sophisticated video surveillance. By 2020, most major Chinese urban public spaces will be equipped with facial recognition cameras under the Skynet system. In many rural areas, the Sharp Eyes project enables people to connect their television sets or smartphones to surveillance cameras at the entrance to their villages.

‘The gift of security’

“A feeling of security is the best gift a country can give its people,” President Xi Jinping said in a documentary on national television just before the 19th National Congress of the Communist Party in October 2017; 42 percent of the world’s video surveillance cameras are in China.

Lin Junyue currently monitors how those pioneering municipalities use his program. “In Suqian, respecting the highway code has emerged as being important…. In Rongcheng, the focus is on morality and civic mindedness, whereas Hangzhou is obsessed with its reputation as an innovative city. Our team examines all that closely while working on protecting personal data, because we must have a framework. There are international standards on this, ISO/TC 290, but these are over-protective and hamper the economy…. By 2020 the rules will be in place, and we will have devised the penalties and bonuses. We will have the infrastructure and the country will embrace the system.” It will be rolled out a year later in Beijing.

Since 2015 Hangzhou, southwest of Shanghai, has combined two systems, an embryonic municipal one nobody we spoke to had heard about, and a private credit-scoring system, Sesame Credit, popular and much admired by the authorities. It belongs to Ant Financial Services Group, the financial arm of China’s e-commerce giant Alibaba, whose headquarters are in Hangzhou. Sesame Credit assigns scores from 350 to 950 to users of Alibaba’s online payment app, Alipay (zhifu bao), which is very popular in China and has a quasi-monopoly in Hangzhou. Customers with good ratings get special privileges on Alibaba platforms.

Jewel in Ant group’s crown

Ant Financial’s new offices, the second in four years, are called Z-Space and were designed by a Seattle-based firm of architects. They can house 8,000 workers, although the company has “only” 3,600 employees. Muscular security guards watch over a constant flow of young employees with the latest Beats headphones, arriving on electric bikes or in sports cars. Alipay is one of the jewels in the Ant group’s crown, with 700 million active users in September 2018 (500 million in 2017). Just scanning a QR code completes transactions. Who needs cash when even street beggars carry QR codes around their necks?

Alipay provides Ant Financial with personal data such as details of taxi rides, supermarket purchases, medical bills, and even acts of generosity. Just as Facebook generates advertising from users’ online activity, so Sesame Credit uses data from purchases through Alipay. Le Shen, Ant Financial’s spokesperson, said: “With clear user authorization, Zhima [Sesame] collects and analyses five dimensions of data collected through the Alipay platform and partner platforms like hotel booking agencies.” These include “purchase transactions, fulfillment of contractual obligations (like credit-card repayment and paying for rented cars), individual’s assets (wealth-management products and certificates of property ownership that users choose to share), user profile (like certificates for occupation and education level that users choose to share) and the pattern of user’s money transfers with other Alipay users.” “And,” he added, “Zhima Credit does not collect information such as geolocation, text messages, phone-call history.”

In February 2015 Sesame Credit’s technology director, Li Yingyun, hinted at how the ratings are calculated when he told the magazine Caixin that buying diapers would be considered responsible behavior, while playing video games for hours could count adversely. No further news has leaked about what data is captured by the algorithm.

Ant Financial is not the only organization interested in people with good Sesame ratings. Businesses and even foreign consulates try to attract such promising individuals, while the online dating service Baihe promotes bachelors with the best ratings. The few rated above 650 can have deposits waived, or receive discounts at hotel groups, bike-sharing applications, and car-rental companies. They get access to a special rental platform for photographic, video, and IT equipment. A good Sesame rating can support an application for a visa to Singapore or Canada.

A good Sesame rating

In 2004 Hangzhou municipality issued a citizen’s card to every resident over 16. This is a multi-function magnetic badge that serves as social-security card, transport card, and means to pay traffic fines at specific points, and allows free access to parks. The authorities announced that they would use it to create a vast database to help understand local needs. Since June 2018 cardholders may use a smartphone application for the same services. Users and their Sesame Credit rating are identified through facial recognition—proof of the link between privately owned Alibaba and the city administration. To the municipal authorities, a good Sesame credit rating means a good citizen. The central bank, which had only succeeded in assigning a credit rating to 25 percent of the Chinese population in 2015, had for some time allowed Sesame and seven other financial enterprises to access all banking and tax data. In May 2018 it finally set up its own credit-scoring system, called Baihung, with these eight financial businesses as minority shareholders.

The port city of Rongcheng in Shandong province is a good example of a fully operational municipal social-credit system supervised by local officials. Lin Junyue said, “While Hangzhou has built its image around high-tech companies, giving more than its due to Sesame Credit, Rongcheng is known for its active management of citizen credit. The city focuses on raising the moral standards of its inhabitants and provides many incentives.”

Rongcheng is a blend of zeal, conviction, and makeshift measures. In the early evening, the park around the city hall was deserted; an old couple in patched tunics told us why: “People are rushing to their TVs because it’s time for People’s Live 360.” Each evening the local channel broadcasts surveillance footage from the previous 24 hours: underpants hanging on the railings of a housing estate, an old sofa left on the pavement, drivers not slowing down at zebra crossings, and jay-walking pedestrians are shown with number plates, faces, and sometimes names, between warnings by police officers, eyes glued to the teleprompter.

Rongcheng used to be a small town known for fishing, a caravan and trailer manufacturing business, and being a winter sanctuary for migrating Mongolian swans. It grew rapidly in six years, absorbing all the villages within a 12-mile perimeter. In 2013 the social-credit system was set up there and in most of the 919 villages under its jurisdiction, leading to a noticeable change in behavior and social interactions.

Each citizen starts with an A rating and a capital of 1,000 points. As they earn or lose points, they climb to A+ or fall to B, C, or D. The loss of just one initial point is enough to slide into a B rating, meaning refusal of a mortgage. People get their ratings as a stamped certificate from the new city hall.

Drivers now stop for pedestrians

Since anyone caught littering risks losing three points, there are no cigarette butts or empty cans on the city streets or buses. Because of the numerous high-end cameras made by Hik Vision—a world leader in video surveillance, whose major shareholder is the Chinese government—the police do not have to monitor in person. Crossing a road in Rongcheng city is no longer a challenge: Drivers stop for pedestrians, a rare occurrence in China. If they fail, the penalty is harsh: a 50 yuan fine ($7.35), three points off the driving license (which has an initial total of 12), and five lost social-credit points. “It happened overnight, in the spring of 2017,” said a passer-by. “The cars suddenly stopped in front of us. I didn’t know what to do.”

Many neighborhoods have adopted a residents’ code of good conduct. In the Qingshan district, large hoardings stress the priorities: pornographic, or “yellow,” books and films are banned, along with growing vegetables in the streets, going to non-registered churches, being rude to neighbors, and showing off in fancy cars at weddings and funerals. Breaking those rules can lead to a loss of points.

In the small villages around Rongcheng, social credit is even more active. A hundred villages already have a social-credit square where bright billboards show details of the commands and pictures of citizens who have won or lost points during the past month.

In July 2018 everybody in the village of Dongdao Lu Jia got a scoring handbook with 12 pages; pruning a neighbor’s tree earns one point, as does taking an older person to hospital or the market (limited to two trips a month). Getting a car out of a ditch is worth one point, helping to read a water meter or lending tools half a point. Letting chickens out of their coop means a 200 yuan ($29) fine and a loss of 10 points; getting into a fight a 1,000 yuan ($147) fine and 10 points; throwing waste into the river 500 yuan ($73) and five points; graffiti or posting stickers hostile to the government, 1,000 yuan and 50 points. The penalties are harsher still for anyone petitioning the upper echelons of government without going through the village head: a fine of 1,000 yuan and an automatic assignment to category B.

Liu Jian Yi, 64, a former farmer, said, “Previously the village paid for cleaners, but they didn’t work well. Now we do the cleaning ourselves. It gives us points and saves money.” He used to travel the country working on construction sites before returning to this village and the stone house where he was born. “I’ve just mended a neighbor’s chimney. If I report that to our party leader and if my friend confirms it with a photograph, I should get another point. We get our scores at the end of each month on a WeChat page, but I don’t own a smartphone.” He claimed that people with good ratings would get baskets of oysters and cans of oil for Chinese New Year, but “a neighbor told me that the village head got a team of old people together to build a workshop for the disabled in the city. None of them had any qualifications but it got through anyway, thanks to a few bribes. And he’s supposed to give us points? It makes you wonder.”

‘A booklet of what we can and can’t do’

The neighboring village of Ximu Jia, population 250, lies on the banks of a river. Ginseng is grown under thick shade. The first house has a large red cross on its concrete roof and is the Protestant church, open twice a week for a congregation of around 20. Ms Mu appeared on its doorstep, where there is an enamel plaque saying, “Family with exemplary social credit.” She said the neighbors all had the same: “It dates back three years when officials rewarded the east side of the village for no reason at all, and then did the same with the west side the following year. They had a quota to fill. This year it’s a bit more serious. We all received a booklet informing us of what we can and can’t do. It’s like being back at school. And it has the assessors’ details so that we can report our good deeds and claim points.”

Her name was not on that month’s shortlist posted in the courtyard of the city hall, where the locals spend much of the day playing xiangqi (Chinese chess). “I’m not ready to call the assessors just because I’ve helped out a neighbor,” she said, and added, lowering her voice, “The husband of a friend of mine didn’t pay back a loan. He only missed one monthly payment, but that put him on a blacklist. All the neighbors knew. Perhaps it’s got nothing to do with it, but now the couple have divorced.”

She was referring to the economic-offenses list updated monthly on the official CreditChina.gov.cn website. Nobody knows the total number of companies and individuals on it, because only those recently added are shown. In September 2018, 228,000 people and 55,000 companies were listed for unpaid loans, taxes, or fines.

Getting your name off the blacklist

On the Weibo microblogging site, offenders describe their penalties and public humiliation. Companies are banned from responding to calls for tenders, while individuals are unable to book rooms in hotels, register their children for good evening classes, or buy tickets for high-speed trains or air travel for a year. Paying up and getting your name off the list becomes an urgent priority.

A few miles to the south, on a large stone by a deserted four-lane highway, the name of a nearby village that is a vanguard of social credit is painted in red. Yu Jianxia heads the local women’s federation, but, with the end of the one-child policy, she is no longer in charge of registering births. Since May 2018 she has analyzed reports from her three assessors, villagers deemed trustworthy to whom good and bad deeds are reported: “I collect all the information on the 18th of each month and send my report to the village and county heads on the 20th. Then we meet on the 25th to discuss the issues and award points. To confirm a good deed, we need at least two photos or a video. The assessors take care of that here because barely 50 villagers own a smartphone.” She claims never to have removed any points: “If anybody leaves litter in front of their house, I give them three days to clear it before deducting a point. The aim is not to cause trouble for people, just to make them a bit more civilized. Our slogan here is Hao Ren Hao Shi [Good people, good deeds].”

Still further, at the end of a hedge of reeds, in the village of Mao Liu Jia, people had arrived from Rongcheng to visit Ma Yu Ling to gain a few points. She has spent 16 years lying on her kang, a heated platform, with a water flask and a remote control next to her chin. She suffers from a nerve disease that was poorly treated and has gradually made her quadriplegic. She said: “In 1998, Shandong TV came to see me and gave me a wheelchair. I could still walk at the time. Now I can’t even move my neck I’m in such pain.”

Twice a month for two years, a few people (never the same twice running) have come from Rongcheng to clean her house and look after her family. That earns them four points. Sometimes they bring trays of Chinese dumplings, which Ma’s husband freezes. “But,” he said, “that doesn’t replace the 3,000 yuan [$440]-per-year benefits we used to get but which stopped the day our son became of working age. And her social-security coverage doesn’t include the vast numbers of incontinence pads, bandages, and disinfectant she needs. They cost 6,000 yuan [$881] per year.” His wife said: “We never leave the village except to go by van to the hospital to replace the urinary catheter. Having a few visitors, getting made up, chatting with a few women from the city, is really nice. I don’t care if they’re only doing it for their ratings.”

Bad points publicly broadcast

In this part of Shandong, there seem to be as many forms of social credit as there are villages. In Teng Jia, the names of those who got bad points are broadcast by loudspeaker every Friday evening, encouraging inhabitants to escape to the neighboring village to have a few drinks or settle a dispute, and get away from being watched and rated.

Jeremy Daum, senior research scholar at Yale Law School, is a specialist in Chinese law and contributing founder of the China Law Translate project, which includes blogs and translations of summaries of social-credit regulations, no mean task: “If you go to a new restaurant, you might be interested in knowing what health-code violations have occurred there—or just seeing a health-code grade hung to the wall. You are probably less interested in knowing that the owner or chef recently forged a train ticket. Banks are unlikely to be too concerned about your failure to sort your recycling when they consider making a loan…. It may be that someday their big-data analysis demonstrates that train-ticket fraud reliably predicts health violations, or that non-recyclers always make late payments, but until then, unified scores aren’t likely to be terribly prominent except as publicity stunts.” He added: “I think the bulk of the system is about administrative regulation of businesses through a series of blacklists. The Chinese system definitely hopes to use shaming, which is less of an issue in the US system.”

Industry-specific lists of good and bad elements among companies and their management already exist for a range of sectors, including import-export, construction, rail and air transport, statistics, legal and notarial advice, event organization, advertising, health insurance, personal-data protection, intellectual property, and wedding planning. But for ordinary citizens, the lack of clarity of these systems, which is very like the US web giants, may transform social credit into a nightmare.

Correction: A previous version of this article incorrectly stated that Huabei, the Alipay-owned lending platform, uses Zhima Credit.

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