The social credit system () is a national credit rating and blacklist implemented by the government of the People's Republic of China. The social credit system is a broad governance strategy to track businesses, individuals, and government institutions and enhance their perceived trustworthiness rather than a single system. It is based on varying degrees of whitelisting (termed "redlisting" in China) and blacklisting. There have been widespread misconceptions in media reports about a unified social credit "score" based on individuals' behavior, leading to punishments if the score is too low or rewards if the score is high.
The origin of the concept can be traced back to the 1980s when the Chinese government attempted to develop a personal banking and financial credit rating system, especially for rural individuals and small businesses who lacked documented records. The program first emerged in the early 2000s, inspired by the credit scoring systems in other countries. The program initiated regional trials in 2009, before launching a national pilot with eight credit scoring firms in 2014.Hornby, Lucy. By 2023, most private social credit initiatives had been shut down by the PBOC, as the central government has been re-centralizing the score system.
The social credit system is an extension to the existing legal and financial credit rating system in China. Managed by the National Development and Reform Commission (NDRC), the People's Bank of China (PBOC) and the Supreme People's Court (SPC), the system was intended to standardize the credit rating function and perform financial and social assessment for businesses, government institutions, individuals and non-government organizations. The Chinese government's stated aim is to enhance trust in society with the system and regulate businesses in areas such as food safety, intellectual property, and financial fraud. Under the system, courts have an ability to impose penalties against judgment debtors, which are the primary form of restrictions imposed by the system.
History Background The origin of the social credit system can be traced back to the early 1990s as part of attempts to develop personal banking and financial credit rating systems in China, and was inspired by Western commercial credit systems like FICO, Equifax, and TransUnion. The credit system aims to facilitate financial assessment in rural areas, where individuals and small business entities often lacked financial documents.
In 1999, businesswoman Huang Wenyun wrote a report following her negative experiences with domestic business trustworthiness and her research into credit management in the United States business environment. At the time, credit management and rating were largely unfamiliar concepts within the Chinese economy. Huang sent her report to Premier Zhu Rongji, who approved it and in August 1999 ordered the People's Bank of China to take immediate action. In September 1999, the Institute of Economics of the Chinese Academy of Social Sciences began a research project on establishing a national credit management system. Huang contributed more than RMB 300,000 to fund the research initiative and sponsored fieldwork in the United States and Europe. In the United States, the research group studied and prepared translations of 17 American credit reporting laws, including the Fair Credit Reporting Act.
In January 2000, the research group from the Chinese Academy of Social Sciences compiled their research into a text titled National Credit Management System. Among these academics was Lin Junyue, who became an important intellectual figure in the development of social credit. Premier Zhu approved the text and instructed government figures from ten ministries and commissions to begin studying the creation of a social credit management system. In late January 2000, the State Council released an essay by Zhu in which Zhu stated that China must "vigorously rectify social credit." In March 2000, Zhu delivered the government's work report to the National People's Congress, in which Zhu talked about the need to rectify social credit in the context of supervision of financial institutions, fraud, tax evasion, and debt repayments.
2002 to 2014 In 2002, the construction of a social credit system was formally announced during the 16th National Congress of the Chinese Communist Party. The central government had not developed a specific vision for what a finished system might look like. Local governments were to develop pilot initiatives which could then guide the larger policy approach.
In 2003, the State Council stated that the basic framework and operational mechanisms for a social credit should be established within five years. Most of the goals in this period were missed, although the financial aspects of social credit developed much further than non-financial aspects.
Among the financial aspects of social credit which developed quickly was credit reporting. In March 2006, the People's Bank of China established the Credit Reference Center, which has information regarding financial credit worthiness and has established basic financial records for 990 million Chinese citizens as of 2019. Its records relate only to finance and does not have any blacklist mechanism.
In 2007, the Inter-Ministerial Joint Conference on the Establishment of the SCS was established, replacing the leading small group which had previously been the top policy organ for social credit issues. The initial blueprints of the social credit system were drafted in 2007 by government bodies. The social credit system also attempts to solve the moral vacuum problem, insufficient market supervision and income inequality generated by the rapid economic and social changes since the reform and opening up in 1978. As a result of these problems, trust issues emerged in Chinese society such as food safety scandals, labor law violations, intellectual property thefts and corruption. Among the purposes of social credit is promotion and moral education regarding personal integrity and honesty. The policy of the social credit system traces its origin from both policing and work management practices.
The government of modern China has maintained systems of paper records on individuals and households such as the dàng'àn () and hùkǒu () which officials might refer to, but these systems do not provide the same degree and rapidity of feedback and consequences for Chinese citizens as the integrated electronic system because of the much greater difficulty of aggregating paper records for rapid, robust analysis.
The social credit system also originated from grid-style social management, a policing strategy first implemented in select locations from 2001 and 2002 (during the administration of Chinese Communist Party General Secretary Jiang Zemin) in specific locations across mainland China. In 2002, the Jiang administration proposed a social credit system as part of the promotion of a "unified, open, competitive, and orderly modern market system." In its first phase, grid-style policing was a system for more effective communication between public security bureaus. Within a few years, the grid system was adapted for use in distributing social services. Grid management provided the authorities not only with greater situational awareness on the group level, but also enhanced the tracking and monitoring of individuals.
One focus of social credit is to build judicial credibility through more effective enforcement of court orders. In 2013, the Supreme People's Court (SPC) of China started a blacklist of debtors with roughly 32,000 names. The list has since been described as a first step towards a national Social Credit System by state-owned media. The SPC's blacklist is composed of Chinese citizens and companies that refuse to comply with court orders (typically court orders to pay a fine or to repay a loan) despite having the ability to do so. It is hosted online at the Supreme People's Court judgment defaulter blacklist portal, and the information is shared with Credit China and the National Enterprise Credit Information Publicity System. The SPC also began working with private companies. For example, Sesame Credit began deducting credit points from people who defaulted on court fines.
Although there was institutional enthusiasm for a social credit system during the 2004 to 2014 period, implementation was adversely impacted by planning difficulties stemming from the relationship between credit reporting initiatives (which were defined narrowly) and regulatory objectives (which were more vaguely defined). A lack of central coordination resulted in institutional bottlenecks.
2014 to 2020 The State Council sought to accelerate the development of social credit and, in 2014, issued the Planning Outline for the Construction of a Social Credit System (2014-2020). The Planning Outline was a major step in China's approach to developing a social credit system; before the 2014 Planning Outline, there had been only one high-level policy document (issued in 2007). Since the Planning Outline, the State Council has issued new guidance annually.
The Planning Outline focused primarily on economic activity in commerce, government affairs, social integrity, and judicial credibility. It set broad goals intended to be reached by 2020:
a reward and punishment mechanism should be fully effective, a basic credit investigation that covers the whole of society should be established, credit oversight mechanisms should be established, credit service markets should be performing well, and fundamental social credit laws, regulations, and standards should be established.
In 2015, the People's Bank of China licensed eight companies to begin a trial of social credit systems. Among these eight firms is Sesame Credit (owned by Alibaba Group and operated by Ant Financial), Tencent, and China's biggest ride-sharing and online-dating services, Didi Chuxing and Baihe.com, respectively. In general, multiple firms collaborated with the government to develop the software and algorithms used to calculate credit. Commercial pilot programs developed by private Chinese conglomerates that have the authorization from the state to test out social credit experiments. The pilots are more widespread than their local government counterparts but function on a voluntary basis: citizens can decide to opt-out of these systems at any time on request. Users with good scores are offered advantages such as easier access to credit loans, discounts for car and bike sharing services, fast-tracked visa applications, free health check-ups and preferential treatment at hospitals.
In 2016, the State Council encouraged market entities to provide preferential treatment to those with outstanding financial credit records and differentiated services to those with seriously untrustworthy records.