The Chinese Social Credit System: A Model for Other Countries?
| Author | Daithí Mac Síthigh,Mathias Siems |
| Date | 01 November 2019 |
| Published date | 01 November 2019 |
| DOI | http://doi.org/10.1111/1468-2230.12462 |
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Modern Law Review
DOI: 10.1111/1468-2230.12462
The Chinese Social Credit System:
A Model for Other Countries?
Daith´
ıMacS
´
ıthigh∗and Mathias Siems†
Many countries know financial consumer credit ratings, and recent years have also seen a
proliferation of rating systems in relation to online platforms and in the ‘sharing economy’,
such as eBay, Uber and Airbnb. In the view of many Western observers, however, the emerging
Chinese Social Credit System indicates a paradigm shift compared to these former rating systems
as it aims for a comprehensiveand unifor m social rating based on penalty and awardmechanisms.
By contrast, this article suggests that the evolving forms of the Chinese system should be seen as a
specific instance of a wider phenomenon. Thus, it develops a frameworkthat compares different
rating systems by reference to their drafters, users, aims, scoring systems, application, use of
algorithms, enforcement and accountability; it identifies shortcomings of both low and high
interventionist rating systems; and it discusses a range of regulatory approaches and emerging
issues that law makers should consider.
‘It would be easy to assume none of this could happen here in the West. But
the 21st century is not going to work like that’.1
‘China’s dystopian tech could be contagious’.2
INTRODUCTION
Since the early 2000s the Chinese government has pursued plans for the con-
struction of a so-called ‘Social Credit System’. Implementation is progressing
quickly, and it can be suggested that the Social Credit System will fundamen-
tally change the life of all Chinese citizens. In a nutshell,3the main innovation,
∗Queen’s University Belfast.
†European University Institute, Italy, and Durham University.
Wethank Jiahong Chen, Zhiyu Li, Jieying Liang, Shaowei Lin, Xiangyang Qian, Shen Wei, Chuan-
man You, Tianshu Zhou, Catalina Goanta, Karen Mc Cullagh, John Morison, Liav Orgad, Ole
Pedersen, Mariana Mota Prado, Isabelle Wildhaber, as well as participants at workshops in London,
Florence and Oxford and two anonymous reviewers for helpful comments. The usual disclaimer
applies.
1 J. Harris, ‘The tyranny of algorithms is part of our lives: soon they could rate ev-
erything we do’ The Guardian 5 March 2018 at https://www.theguardian.com/comment
isfree/2018/mar/05/algorithms-rate-credit-scores-finances-data (all URLs last accessed 14 June
2019).
2 A. Greenfield, ‘China’s Dystopian Tech Could Be Contagious’ The Atlantic 14
February 2018 at https://www.theatlantic.com/technology/archive/2018/02/chinas-dangerous
-dream-of-urban-control/553097/.
3 For details see text to notes 95–155 below.
C2019 The Authors. The Modern Law Review C2019 The Modern Law Review Limited. (2019)82(6) MLR 1034–1071
Daith´
ıMacS
´
ıthigh and Mathias Siems
once fully implemented, could be that each Chinese citizen will be given a
score measuring their sincerity, honesty, and integrity, and that this score will
then be a major determinant for their lives, for instance, whether to be able to
get a credit, rent a flat, or buy a plane ticket, or being given preferred access to
hospitals, universities and government services.
In this Chinese government programme, the notion of ‘social credit’ serves
as an extension of mere financial scoring systems from elsewhere in the world,4
given that the Chinese ‘social credit’ score will consider a wide range of per-
sonal factors.5It also resembles, but goes further than, a range of systems that
are intended to increase the prominence of reputation in relation to transac-
tions, online platforms and in the ‘sharing economy’. In addition, the Chinese
initiative will cover both companies and individuals; the latter is more novel
(and more controversial), given the prevalence of ratings for the former in the
financial sector and in fields such as corporate social responsibility.6Thus, we
focus here on rating systems concerning individual persons.
This article is motivated by the fact that it cannot be assumed that ‘what
happens in China, stays in China’. The Social Credit System already applies
to foreign workers and companies in China, and possibly also to all ‘overseas
Chinese and ethnic Chinese’ regardless of their place of residence.7In addition,
it can be observed that China’s economic, political and ideological influence
leads to a general diffusion of Chinese law; writings about China’s Belt and
Road Initiative, the ‘Beijing consensus’ of development assistance, and the
impact of Chinese investments in Africa show that China’s influence abroad is
not merely of an economic nature but that it increasingly shapes law and policy
elsewhere.8
It may of course be argued that the Social Credit System is something that
should be seen as not a model but as a counter-model for other countries.9We
seek to provide a critical but also nuanced and measured assessment, against a
backdrop of typical ‘Western’ responses which simply dismiss the Social Credit
System as ‘Orwellian’, and a general lack of any critical debate on the topic
in China.10 In particular, this article will identify the many variations within
4 See text to notes 13–94 below.
5 The term ‘social credit’ has also two further meanings that are outside the scope of this article,
namely, as an economic reform programme developed in the 1920s (see C.H. Douglas, Social
Credit (Vancouver: Institute of Economic Democracy, 1924)) and as a type of ‘micro-credit
aiming at fighting poverty’ (see F.A.F. Ferreira et al, ‘A Socio-Technical Approach to the Eval-
uation of Social Credit Applications’ (forthcoming) Journal of the Operational Research Society
https://doi.org/10.1080/01605682.2017.1415650).
6 Despite many differences, see, for example, L.C. Backer, ‘Next Generation Law: Data Driven
Governance and Accountability Based Regulatory Systems in the West, and Social Credit
Regimes in China’ Working Paper, 7 July 2018 at https://ssrn.com/abstract=3209997.
7 See S. Hoffman, ‘Social credit: technology-enhanced authoritarian control with global conse-
quences’ Policy Brief Report No 6/2018.
8 See, for example, S. Sepp¨
anen, ‘Chinese Legal Development Assistance: Which Rule of Law?
Whose Pragmatism?’ (2018) 51 VanderbiltJournal of Transnational Law 101; W. Zhang, I. Alon and
C. Lattemann (eds), China’s Belt and Road Initiative: Changing the Rules of Globalization (Cham:
Palgrave, 2018).
9 Or if it were to influence other countries, it may be argued that it should be seen as a ‘malicious
legal transplant’, cf M. Siems, ‘Malicious Legal Transplants’ (2018) 38 Legal Studies 103.
10 See further text to notes 127–155 below.
C2019 The Authors. The Modern Law Review C2019 The Moder n LawReview Limited.
(2019) 82(6) MLR 1034–1071 1035
The Chinese Social Credit System
the development of the Social Credit System in China,11 while also addressing
debates on the importance of reputation and grading/ranking and on the power
of algorithms. We argue,therefore, that what is happening in China can be seen
as a specific instance of a wider phenomenon. Even more so, as reputation-
based quantitative tools have become established in the West, the Social Credit
System may tell us something about their evolution in Western countries (or
even the future of global normative orders12).
Accordingly, this article is interested in a number of overlapping research
questions: to start with, how can we understand both the multiple Chinese
and Western systems by reference to their drafters, users, aims, scoring systems,
application, use of algorithms, enforcement and accountability? Is it then the
case that the Social Credit System is based on a unique strongly interventionist
logic, or could there be mixtures between the Chinese and Western models?
And if reputation and rating systems consolidate in Western markets in a similar
fashion, what opportunities, features, controversies, and pitfalls will arise? And
how could law makers intervene if this happens?
The corresponding structure of this article is as follows. The next part maps
the general debate about reputation, ranking and rating in the West (setting out
salient features of its history in credit scoring and related systems, and identifying
the significance of reputation data for online business and the ‘sharing’ or peer-
to-peer economy); we conclude this part by considering certain controversies
regarding such data, and setting out an initial framework for analysis. The
following part explains the operation and variations of China’s Social Credit
System today as well as likelyfuture developments. On this basis, the subsequent
part compares and evaluates both of these systems, identifying shortcomings of
low and high interventionist rating systems, and assessing a range of regulatory
approaches, followed by a conclusion.
REPUTATION, RANKING, AND RATING
A short history
Although the identification and dissemination of reputational information has
formed an important aspect of 21st -century e-commerce and sharing econ-
omy business models, the concept is certainly a more established one. The
best known is probably found in the financial sector, where the ‘rating’
of the creditworthiness of companies, institutions, individuals, and financial
instruments (eg, bonds) has a longer history,13 and has progressed beyond
11 See further text to notes 95–138 below.
12 cf L.C. Backer, ‘And an Algorithm to Bind them All? Social Credit, Data Driven Governance,
and the Emergence of an Operating System for Global Normative Orders’ Working Paper, 21
May 2018 at https://ssrn.com/abstract=3182889.
13 D.Mar ron,Consumer Credit in the United States (New York, NY:Palgrave Macmillan, 2009) 100.
1036 C2019 The Authors. The Modern Law Review C2019 The Moder n LawReview Limited.
(2019) 82(6) MLR 1034–1071
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