In 2014, China issued a national reputation system that requires monitoring the behavior of its population. By using both government and personal data, citizens in the mainland are assigned a score that rates their credibility in commercial, social, judicial, and government affairs.

The Party offers an incentive to obtain a good score. People with high scores are offered rewards, which can include favorable interest rates, better jobs, and even the best matches on dating sites. Having a bad score may result in travel restrictions, throttled internet speeds, or being restricted from elite schools.

There are plans for the social credit system to extend to business entities too, possibly even foreign businesses operating in China. As with individuals, companies are incentivized to have good scores since scores will impact loans, tax rates, and even investment opportunities.

China’s goal is to have the social credit system operate nationwide by 2020. Pilot programs have been in effect since 2015. Alibaba and Tencent are among the companies that are already participating in the system via products called Sesame Credit and Tencent Credit. Both products assign its users a social credit score using algorithms that assess users’ spending and social habits.

Gathering the data for scores isn’t difficult as China has become an increasingly cashless society. According to China’s iResearch Consulting Group, mobile payments in the country totaled $9 trillion in 2016. The preferred way to make payments is through mobile devices using apps like Alipay and WeChat Pay. The parent companies behind these apps offer an ecosystem of products, and can collect more than just financial transactions and spending habits. For example, Alibaba, which offers Alipay, can monitor the shows people watch on its YouKu Tudou video site.

The details of how the social credit system will operate are still being worked out and the exact methodology for scoring is unknown. However, a person’s social credit can go up or down depending on behavior. Good behavior such as paying bills on time, adhering to traffic rules, or high academic marks can bring up a score. Not paying loans on time, criminal records, and posting fake news are just some circumstances that can bring a score down.

Some possible considerations for scoring may even sound ridiculous: Buying too many video games might be a sign of an idle gamer and the purchases can lower a score. On the other hand, buying diapers might indicate the customer is a parent and a responsible individual, so the person’s score may improve. There’s also a controversial matter regarding friend groups. Having friends with bad scores might become a negative impact if user connections are taken into consideration.

Source: The Wall Street Journal

So why roll out a reputation system? China views the social credit score as a way of influencing good behavior, which will then reduce some of the country’s problems. It’s a way to nudge citizens to be law abiding, energy conserving, fiscally responsible, and even obedient to the Party. The system is also a means to influence better business practices and fix the lack of trust in the Chinese market. Those in favor of the credit system believe issues such as food safety and counterfeit goods will fade away with the new program in place.

While the credit system has potential to eliminate real problems in China, there are concerns that the program is too Orwellian, and it raises issues about privacy, government control, and social mobility. Can the government (and the tech companies they work with) be trusted to access and safeguard personal data? Should the government be allowed to influence what types of purchases a citizen makes and who they are friends with? Will individuals with criminal histories be given the chance to start over with this credit system in effect? These are complicated matters that need to be addressed by 2020.

What are your thoughts about a social rating system? Is it something you would participate in?