One of the most fascinating issues surrounding social credit is whether or not user data from private companies – especially tech platforms – will be incorporated into the social credit system.
The fear is that online marketplaces like Taobao and TMall might provide the government with customers’ shopping histories, and citizens will be judged according to what they buy. Or maybe chat records on social media will be assessed by an algorithm which flags banned words, connects those words to the user’s social credit file, and they are automatically punished.
Quick answer: that particular scenario is not currently happening. We haven’t found any evidence to suggest that behavioral shopping data (like what items people purchase online), and social media data (like what people say in chat rooms), will feed directly into the national social credit database. You won’t get a black mark on your record for buying cigarettes.
However, private tech platforms are participating in the social credit system, particularly in the areas of fintech and ecommerce.
It’s a little difficult to tease these concepts apart, because many of China’s major ecommerce players are also China’s biggest online lenders, and they operate financial services platforms in tandem with their online marketplaces.
Alibaba is a key example: it runs China’s biggest shopping portals, Taobao and TMall, as well as one of China’s most popular digital wallets, Alipay, which in turn offers onboard micro-lending services and investment accounts. Jingdong is both an ecommerce platform specializing in electronics, and it also operates a financial services wing through Jingdong Finance.
Leveraging these interconnected channels, these platforms are signing two-way data-sharing agreements with the central government, promising to restrict services to users that have been blacklisted by the state, and preventing them from making certain purchases or taking out certain kinds of loans.
Alibaba, who signed an agreement with the Supreme People’s Court in 2015, is one such company. It restricts users who appear on the court defaulter blacklist from engaging in luxury consumption via its ecommerce platforms. 1
As of December 17, 2015, through its credit platform, [Alibaba] has restricted more than 130,000 people from buying air tickets, renting cars, taking out loans and so on.
Other big tech companies participating in “Unified Rewards and Punishments” include Suning Electronics, Jingdong Finance, network security giant Qihoo 360, Tencent’s WeBank, bike sharing platform Mobike (recently acquired by Meituan Dianping), and many others. 2 3 4 5 6
As we mentioned a little earlier, Qihoo 360s involvement has extended to assisting the government in naming and shaming Beijing residents on the court defaulter blacklist: 7
The hundreds of millions of people who have the Qihoo 360 app installed on their phones will soon receive notifications on their screens whenever they call or are called by a person on the Chaoyang District court’s blacklist. Calls with people who have outstanding debts, with divorced parents who don’t comply with child support or honor visitation rights, or with employers who refuse to pay their staff will prompt a message that reads: “Included on the list of dishonest individuals.”
CTrip, China’s premier online travel portal (kind of like Expedia), also signed a cooperative agreement with the NDRC, agreeing to encourage the travel service providers on its platform to issue public “credit promise letters” promising to act in good faith and in the public’s best interest. These letters would then be published on various government-run social credit-focused websites. 8
In our section on What Social Credit Isn’t, we spent a little time talking about the difference between the national SCS and private social credit systems. We mentioned that there are dozens of private SCS in China. One of these in particular deserves a closer look.
The most well-known and widely-adopted private SCS is owned by Alibaba’s financial services subsidiary, Ant Financial. It’s called “Sesame Credit”, and it assigns scores to everyone who uses Alibaba’s digital wallet, Alipay. A high Sesame Credit score doesn’t dictate your place in society, or net you any benefits from the city government. But it does mean you get access to perks and preferential treatment on the apps in Alibaba’s ecosystem.
For example, users with a Sesame Credit score of over 650 can pay by installment for some items on Alibaba’s shopping platforms, or rent Alibaba-owned shared bicycles without paying a deposit.
The whole system is kind of like a feedback loop: using Alibaba products and behaving well on Alibaba platforms raises your Sesame Credit score, which gets you more perks, so you want to use Alibaba products more, and using Ali products raises your Sesame Credit score some more, so you get more perks… you get the idea. Ali can use this feedback loop to influence your purchasing decisions, making Sesame Credit a weapon of market competition.
Though some might disagree with our use of the term here, we call this a “social” credit system because it takes some social metrics into account, like how many connections you have in the Alibaba network, and if you make charitable donations through Alipay.
While Sesame Credit, like all private SCS, is technically optional to use, Alipay is one of the most popular apps in China — there are currently over 1 billion users — and there aren’t many alternatives.9 Choosing not to use Alipay is kind of like opting out of Facebook. Sure, you can. Some people do. But doing so makes it harder to shop online, pay rent and utility bills, and transfer money.
Because Alipay is so ubiquitous, many Chinese people already have a Sesame Credit score. And Alibaba has begun to leverage the app’s popularity to try to solve a national conundrum: namely, the lack of trust between buyers and sellers online.
Fraud and counterfeiting is so rampant in China that consumers are very wary of being scammed, especially in P2P marketplaces. Because Ali already has so much data on its own users, including financial information and shopping behavior, it has offered up the Sesame Credit scoring system up as a solution to these consumer trust issues. That’s why some Chinese apps — like second-hand markets, home sharing and even some dating apps — display users’ Sesame Credit scores publicly as part of their user profiles.
Because Sesame Credit is so visible and widely-adopted, many reports have confused Sesame Credit with the national SCS. The two things are very different. But there are some weird areas of overlap.
For example, Alibaba cooperated in the Unified Rewards and Punishments system by agreed to lower Sesame Credit scores for those users who appeared on the court defaulter blacklist, a move which they claim spurred these users to pay up: 10
According to Sesame Credit statistics, court defaulters open Sesame Credit 12 times more often than other users, which indicates that they place great importance on punishments delivered via the platform.
More than 5,300 [of these] court defaulters have paid off their debts. Among them, more than 1500 were those who had been evading payment for three or four years.
In 2016, Alibaba signed another data-sharing MOU with the central government, promising to expand its involvement in meting out penalties and perks: 11
Through the use of different application scenarios such as consumer finance, financial leasing and public utilities services, Ant Financial will offer market-oriented incentives for the trustworthy as well as differential restrictions for the untrustworthy. In this way, the convenience of for trustworthy individuals is continuously improved, the coverage of punishment for breach of trust is expanded, and the role of big data platforms is brought into play. Together, we will [create an environment in which] “one act of dishonesty will lead to restrictions from all sides”.
These types of agreements, we believe, are only the beginning of a slow integration between the SCS and the world of ecommerce and digital payment.
At the moment, China’s data privacy laws are rather weak (get some background on this at Technode). And though the policies on social credit have paid significant lip service to the concept of protecting personal information, corporate trade secrets and state secrets, the language isn’t very specific.
A 2017 policy urges regulators to: 12
“Protect personal privacy. Clarify the rights and procedures for the querying of personal information, protect database security, establish and improve the registration and review system for the use of personal information, and to prevent information leaks. For those who intentionally or mistakenly disclose personal privacy information, the relevant units and personnel shall be strictly investigated and held responsible according to law.”
These vaguely-worded policies are more focused on protecting data from corporate misuse, unauthorized disclosure and scammers, and not so much on protecting citizens from the prying eyes of the state.
One central government document from 2016 outlines exactly which data in the national social credit database is classified as “publicly available”, which data is classified as “restricted” and which is “for government sharing only”. 13
As we mentioned in our intro, of the 400 data categories listed in the document, about 75% of are classified as open to the public. Almost all of this relates to corporations, rather than citizens. From what we can tell, the only time an individual’s personal social credit information is made public is when they’ve been placed on a red or blacklist, in which case their name, part of their national ID number, and in some cases, details of their offense, are shown. But corporates are very much under the spotlight.
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