NAME: XIN HU
TUTOR: Jennifer Hagedorn (Wednesday 4-7 PM)
The Chinese government has recently proposed an initiative to assign a specific “social credit” score to each citizen by 2020. This means that every Chinese citizen will be rated according to their economic and social status, and will receive allowances and restrictions accordingly. Governments can also access data on specific behaviors, such as any traffic violations and spending habits, to make it easier to obtain loans or secure employment.
Although China’s social credit system has not yet been fully implemented, the Chinese government has authorized many companies to try out their social credit system. For example, Sesame Credit Scoring System, launched by Ant Financial Services Group, is a pilot project where users can opt-in and receive a social credit score to unlock many perks. The users who have high scores can share their social credit score with friends, promote them in popular dating apps, and even passed airport security more quickly.
The algorithms of the Social Credit System and the Sesame Credit Scoring System
Like the credit scoring service provided by FICO, which is widely used in the United States, China draws on similar models. Government agencies and private companies collect large amounts of data, such as personal financial status, social media activities, credit records, health records, online purchases, Taxes, legal affairs, and related personnel, as well as images collected from China’s 200 million surveillance cameras and facial recognition software (Ma, 2018). Data on social and economic obligations and contractual commitments that demonstrate non-compliance with the law are flagged and aggregated at the government level to determine the credibility of companies and individuals.
It is similar to the Social Credit System, Sesame credit score is comprehensive processing and evaluation of sesame credit for massive information data, which mainly includes five dimensions: user credit history, behavior preference, performance ability, identity traits, and personal relationship (Marr, 2019). Sesame Credit is based on Alibaba’s e-commerce transaction data and Internet finance data of Ant Financial and establishes data cooperation with public institutions such as the Public Security Network. Unlike traditional credit data, Sesame Credit Data covers credit card repayment and online shopping, transfer, wealth management, water and electricity, gas payment, rental information, residential relocation history, social relationships, and so on. “Sesame Credit” can analyze users’ credits by analyzing a large number of online transactions and behavioral data. These credit assessments can help Internet finance companies to draw conclusions about users’ repayment willingness and repayment ability, and then provide users with fast credit and Cash installment service. The range of Sesame scores is from 350-950 points, and 700 points or more indicate that the default rate is extremely low and the credit status is excellent. Conversely, users between 350 and 550 points are rated as extremely poor credit, and users with poor credit status will also be subject to certain “punishments”. For example, in terms of transportation, users with low credit status will be restricted when purchasing tickets on the internet, because in China, the purchase of tickets for travel is subject to the real-name system. The credit status of the user will be directly observed by the third party (ticket seller). Essentially, Sesame Credit is a credit information system that collects data from government and financial systems and fully analyzes the behavioral records of users on platforms such as Taobao and Alipay and so on.
The pros and cons
1. More comprehensive credit evaluation
Under the traditional credit information model, people with credit history and active credit records are mainly investigated, and a large number of vulnerable groups cannot cover them. At present, many of the 1.3 billion citizens in China do not have a credit history or have no credit history at all. The Central Bank (People’s Bank of China) has financial data of 800 million people, but only 320 million people have a traditional credit history (Miller, 2018). It is unclear what happens to millions of Chinese who do not have a credit history and car or house. However, collecting information through the Internet to analyze people’s credit can cover more people, especially vulnerable groups such as farmers, college students, and entrepreneurs, thus expanding the scope of credit analysis.
2. Create a social atmosphere of trustworthiness and build a society of integrity
“Allow the trustworthy to roam everywhere under haven while making it hard for the discredited to take a single step.” (Chorzempa, Triolo & Sacks, 2018)Is the official slogan of China’s Social Credit System. Through the social credit system, can help people with high credit to obtain more efficient and better services, so that people with low credit cannot enjoy the convenience brought by credit. It helps to keep people in the habit of being honest and trustworthy; people with low credit can be afraid and improve their integrity through “punishment”. In addition, the social credit system can alleviate the fear of buying and increase consumption, because due to the punishment mechanism, “trust destroyers” will be removed from the market. People with high credits will receive some perks because of their high credit level, which will increase consumption. For example, users who score high on Sesame Credit can enjoy preferential policies for some products. Implementing a Social Credit System will also reduce the loss of funds. People with low credit will not be allowed to conduct credit business, thus reducing the outflow of funds such as claims and bad debts.
1. Algorithms may lead to inequality
At present, the data used in analyzing credits in Sesame Credit is still based on the Alibaba platform and does not effectively access the central bank’s credit reporting system and other financial institutions. In addition, users who frequently use Taobao, Alipay, Yubao, etc. to conduct transactions and operations will also have a relatively high sesame score. This is unfair to users who have high credits but not active on the Ali platform. It also reflects the impact of the limitations of the data source on the objectively of the score.
2. Infringement of personal privacy
Many companies are currently under increasing scrutiny in collecting and using user data. If the social credit system does not restrict the collection and use of personal information, people’s personal privacy will be easily leaked. For example, when using the Sesame Credit App, the user must sign the Sesame Service Agreement. Once signed, the user is equivalent to unconditionally authorizing Sesame Credit to obtain and use personal information. This means that Sesame Credit can provide useful information directly to third parties, and the user has no right to revoke the third party’s information query authorization. Sesame Credit can continue to retain and use user information even after the termination of the service. This will result in the user’s personal privacy being unknowingly leaked to multiple third parties. Although many legislation have the positional statement to protect citizens’ personal information, they are not perfect in terms of specific protection methods and means of protection. This leads to the protection of citizens’ personal information more dependent on the moral consciousness of the Internet companies.
At present, China’s Social Credit System has not been perfected, it is still early to draw conclusions. Although some people think that the full implementation of the social credit system strengthens the restrictions on individual ownership and self-interest, and violates the rights of citizens. However, others believe that such a system increases the sense of security and promotes social construction. In my opinion, whether China’s social credit system can be successfully implemented depends on whether the government and relevant units can correctly choose the monitoring scope, establish a protection system to protect people’s personal information, improve relevant laws and regulations to maintain people’s privacy.
Chorzempa, M., Triolo, P., & Sacks, S. (2018, August 31). China’s Social Credit System: A Mark of Progress or a Threat to Privacy? Retrieved from https://piie.com/publications/policy-briefs/chinas-social-credit-system-mark-progress-or-threat-privacy
Marr, B. (2019, January 21). Chinese Social Credit Score: Utopian Big Data Bliss Or Black Mirror On Steroids? Retrieved from https://www.forbes.com/sites/bernardmarr/2019/01/21/chinese-social-credit-score-utopian-big-data-bliss-or-black-mirror-on-steroids/#4b8c1b4048b8
Ma, A. (2018, April 28). China is building a vast civilian surveillance network — here are 10 ways it could be feeding its creepy ‘social credit system’. Retrieved from https://www.businessinsider.com.au/how-china-is-watching-its-citizens-in-a-modern-surveillance-state-2018-4?r=US&IR=T
Miller, K. N. (2018, June 21). The Alarming Chinese Social Credit System and the Rise of Authoritarian Surveillance States. Retrieved from https://kbnbworldnews.wordpress.com/2018/06/21/the-alarming-chinese-social-credit-system-and-the-rise-of-authoritarian-surveillance-states/
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