China’s Social Credit System

Countries like the United States, Japan and so on all have relatively complete social credit systems that can regulate the market order. And how about the social credit system in China?

What’s China’s Social Credit System?

The Social Credit System (or社会信用体系) is also called the National Credit Management System(or国家信用管理体系) or the National Credit System (or国家信用体系). The Social Credit System of China is mainly used to record credit information, reveal and punish bad credit behaviors, so as to achieve the role of vigilance. The system is being established and improved. Let’s see how it works at the moment.

How does China’s Social Credit System Work? Collecting Credit Information

In most cases, the government takes the lead in collecting credit information from various aspects. The information can be divided into the following three categories.

Credit Record from Public Sources

Sources: Government agencies like State Administration for Market Regulation, State Taxation Administration, the Supreme People’s Court of The People’s Republic of China, and so on.

Record Type:

1. Information about any natural person and legal representative of a company including personal tax evasion, property status, administrative penalties, etc.

2. Information about companies including illegal construction records of the companies; tax evasion; quality inspection record, etc.

Credit Record from Private Companies

Sources: Companies Chinese citizens do business with.

Record Type: The record of transactions like the rental of public properties such as shared charge, shared umbrella and so on, once the rented item is not returned in time, it will be recorded as a breach of trust.

Credit Record from Personal Sources

Sources: Banks.

Record Type: Bank loans, transfer records, and other actions concerning individuals and banks.

Punishments and Rewards

Once a dishonest record exists in the sources mentioned above, the citizens or the companies will be punished in the following ways:

1. Limited high consumption in daily life: an official dishonest individual cannot buy luxurious items, travel in first-class trains, or live in star-rated hotels.

2. Can’t get a loan from banks.

3. Can’t be a boss or hold an important position in a company.

4. Online shopping is limited: buying anything other than basic daily necessities from online stores like Taobao is not allowed.

5. Their Children are not allowed to attend private schools.

On the other hand, people will be rewarded if the credit score is high. He may be rewarded in the following ways:

1. Rent a car without a deposit.

2. Preferential policies for honest companies like tax cuts.

3. Bonuses.

Results and Existing Problems of China’s Current Social Credit System

Results

The result is not very good at the moment because the system is not perfect. Take a singer named Justin(or 黄明昊) in China as an example. His mother is on the Official List of Dishonest Persons Subject to Enforcement which means she owed much money but is unwilling to pay it back after official judgment. She still lives a very luxurious life: driving a fancy car, traveling around, and so on.

Why the Chinese government can do nothing to make her return the money? Because there are still loopholes in the social credit system. An official dishonest person may transfer property to their relatives in order to escape punishment. So, the court cannot legally confiscate their property or freeze their bank accounts.

Existing problems of China’s Social Credit System

1. No strong legal support for rewards and punishments.

2. Low cost of breaking the law: Daily life of a dishonest individual is not changed a lot and some of them still can lead a happy life.

3. Weak enforcement：There is a large number of dishonest individuals in China, but not enough law enforcement officers to persuade dishonest individuals to pay back their money.

4. A weak sense of credit: Most Chinese are not well educated. In some remote rural areas, villagers have a weak sense of credit.

It is reported that all residents in a western village in China borrowed money from banks or private companies, but refused to pay it back. Because too many people were involved in this case, ordinary ways of enforced actions did not work. The police did not know what to do because the local jell is not big enough for all the involved villagers.

Private companies who lent them money could not even enter the village to negotiate, since all the villagers are their “enemies”. The borrowers there did not care whether they are on the Official List of Dishonest Persons, or whether they are prohibited from traveling in first-class trains or airplanes. This was not their way of life anyway.

In all, China’s Social Credit System is not perfect at the moment and still needs improvement. It will be a long-term and tortuous process for China.