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The social credit system in China is an integrated mechanism aimed at assessing and monitoring the reliability of individuals, corporations, and government institutions nationwide. Based on a multitude of parameters analyzed using big data processing tools, this system seeks to encourage socially beneficial behavior and penalize violations of laws and moral standards. Let’s start with key insights into China’s social credit system (by the way, the most accurate translation here would actually be “social credit system”; we’ll use both terms interchangeably throughout the article):

1. The primary objective of the social credit system in China is to provide a comprehensive assessment of the trustworthiness of individuals and organizations, primarily for government authorities at all levels.
2. Although the social credit system was officially launched in the early 2010s and continues to evolve, at its core, it formalizes longstanding traditions of social evaluation that have existed in China for centuries.
3. A low social credit score can have serious consequences. It may limit one’s ability to travel, find employment, secure loans, and engage in contracts with government institutions. Conversely, a high social credit score can significantly streamline various business activities.
4. It’s important to note that any foreign business opening a branch in China is also subject to the social credit system. This applies both to individual assessments of the company’s employees and to the evaluation of the company’s overall activities.

For those looking to gain a deeper understanding of this system, we offer a detailed examination of its aspects. China’s Social Credit System: A Tool for Control or a Means to Foster Trust? In the view of Western media, China’s social credit system is both mysterious and unsettling. This system is often associated with total state control over citizens, reminiscent of the "Big Brother" from Orwell’s novel. By the beginning of the current decade, approximately 80% of China’s provinces, regions, and cities had implemented some form of social credit rating. The system initially focused on financial creditworthiness, similar to credit ratings in other countries, but gradually expanded to include other parameters related to societal compliance and legal violations. As the social credit system developed, it increasingly shifted toward a broader assessment of the various factors by which a company’s or individual’s “trustworthiness” could be measured. Today, the corporate social credit rating component is particularly advanced—over 33 million enterprises in China have been evaluated in terms of their "reliability." The overarching goal of the social credit system is, in fact, well-intentioned: to help individuals and businesses make fully informed decisions. For example, should they do business with a particular company or not? Why Did the Social Credit System Emerge Specifically in China? The so-called "European" mindset — which includes North American, Latin American, and Russian mentalities—is rooted in the ancient Greek concept of individual freedom and the ancient Roman principle of the law’s primacy over the individual (Dura lex, sed lex). Ancient Greece and Rome had little influence on Chinese culture and society, however. Instead, China developed through a blend of Buddhism, Daoism, and Confucianism, which place moral principles above both the individual and the law. In China, morality has traditionally served the role of law. As Confucius’s followers would say, “To die of hunger is less important than to lose morality.” The Chinese term *chengxin* (诚信, *chéng xìn* in Putonghua) can be translated as “steadfast commitment to moral values.” Living according to *chengxin* is very important to the Chinese people. This doesn’t mean everyone leads a “highly moral” life—people are people, after all. However, “highly moral” behavior is encouraged by society, while a life that contradicts *chengxin* is disapproved of by the community. Confucianism had a profound influence on China’s first imperial dynasty, the Qin (221–206 BCE). During this period, a powerful state bureaucracy was established, which used a meritocratic system to evaluate and promote government officials. In a sense, this was China’s first social credit system. Since then, the assessment of a person—whether a citizen, resident, or government official—has never ceased in China; instead, it has been continuously refined and developed. The concept of a “personal file,” familiar to many of us from school and work (remember “reprimand recorded in the personal file”?), has been used continuously in China since ancient times. In Chinese, such a file is called 档案 (*dàng’àn* in pinyin), and every modern Chinese citizen accumulates many of these personal records from birth onwards. Modern Chronology of Social Credit Development in China - 1978–1979: Deng Xiaoping’s reforms opened China’s economy, revealing that economic growth was hindered by the absence of traditional credit rating systems and frequent corruption scandals. - Mid-1990s: The first credit databases were created, including the "Bank Credit Registration and Reference System" in 1997. - 1999: Premier Zhu Rongji initiated the establishment of the National Credit Management System to combat corruption and defaults. - 2000: Pilot trials began in Shanghai for a system evaluating creditworthiness based on utility bill payments. - 2004: President Jiang Zemin approved the social credit system at the 16th CPC Congress, with trials launched in seven municipalities. - 2006: The Credit Reference Center was established as a national credit reporting center, and banks began reporting customer creditworthiness. - 2007: A joint interministerial system was created to coordinate the development of the social credit system, involving key state agencies. - 2009: Regional pilot projects for the social credit system were launched. - Post-2010: The social credit system’s development accelerated with the advent of new technologies like big data analysis. By the late 2010s, artificial intelligence was also being integrated. - Suzhou: The city implemented a social credit system developed with Ant Financial, called "Osmanthus," covering 13 million residents. High scores earned citizens privileges like discounts on public transportation. The Suzhou experience demonstrated how the social credit system could incentivize positive behavior within society. - 2019: China’s State Council published the "Guiding Opinions on Accelerating the Construction of the Social Credit System." This document emphasized the importance of using big data and artificial intelligence to identify high-risk entities requiring closer regulatory oversight. Today, China’s social credit system continues to evolve, integrating advanced technologies and responding to external challenges such as pandemics and economic crises. While the system offers potential benefits like enhancing trust and improving social order, it also raises serious questions about privacy protection and the risk of misuse. How this system will develop in the future depends on balancing control with respect for citizens' rights. How Does China’s Social Credit System Work Today? China’s social credit system evaluates individuals and businesses based on data gathered from various sources, including government agencies and private companies. Ratings can be numerical (e.g., from 1 to 1,000) or letter-based (from A to D). Information is consolidated through centralized databases, similar to the U.S. NCISP (National Criminal Intelligence Sharing Plan), which links local, state, regional, and tribal law enforcement databases with those of the federal government. Corporate ratings consider factors such as timely tax payments, possession of necessary licenses, compliance with environmental and production standards, and adherence to industry regulations. Notably, ratings can be affected by the behavior of business partners, compelling companies to be cautious in selecting contractors. What are the Consequences for Low Social Credit Scores in China? Although China’s social credit system is still developing, several potential negative consequences for low ratings are already evident. These may include:

1. Travel Restrictions: People with low ratings can be barred from using airplanes or trains. For instance, in 2019, 23 million people were blacklisted from travel.
2. School Bans: Children of parents with low ratings may be denied admission to certain universities or schools. In 2018, a student was reportedly refused university admission due to his father’s poor rating.
3. Employment Limitations: Employers may use blacklists in hiring, and certain jobs, particularly government positions, may only be open to those with high ratings.
4. Increased Scrutiny: Companies with low ratings may be subject to additional regulatory inspections.
5. Public Shaming: Regulatory bodies may publicly post information on low-rated individuals and companies on their websites, making it harder for them to conduct business.

It’s important to note that collaborating with companies or individuals who have low social credit scores can negatively impact your own rating. For instance, if a person with a low score starts a business, their company may also begin with a low rating. Each city has its own rules, and points can be deducted for various infractions, such as:

• Rarely visiting one’s parents.
• Jaywalking (for example, here in Shenzhen, where our office is located, some traffic lights have large screens that display jaywalkers. Anyone crossing on a red light may be shown on this monitor throughout the day).
• Walking a dog without a leash.
• Smoking in prohibited areas.
• Cheating in online games.

At the same time, China’s judicial system offers everyone the opportunity to appeal decisions related to social credit downgrades. [caption id="" align="alignnone" width="849"] Monitors in Shenzhen: if you jaywalk across the crosswalk on a red light, your image will be displayed on the monitor all day in rotation with other violators.[/caption] "Blacklists" and "Redlists" in China’s Social Credit System In China, national and regional blacklists are maintained based on various violations, which are gradually being integrated into the social credit system. Companies may be added to a "blacklist" due to specific infractions or a low social credit rating. However, blacklisting does not happen automatically; there is also a list of infractions that indicate significant but non-critical non-compliance. Appearing on the infractions list serves as a signal to improve one’s reputation to avoid being blacklisted. The Chinese government analyzes blacklists, using this information to assess citizens and companies. Although the blacklist system is still developing, it has already led to restrictions on purchasing tickets and traveling for tens of thousands of citizens. Currently, there is no unified blacklist. Instead, various departments and government bodies may rely on multiple lists, each managed by different state agencies. Inclusion on the blacklist of one agency may lead to similar actions by other agencies. Removal from a blacklist takes between 2 to 5 years and affects social and economic privileges, though early removal is possible upon rectification of the issue. The social credit system is used not only to punish but also to prevent potentially harmful behavior. Incentives in China’s Social Credit System China’s social credit system not only punishes but also rewards those who strive to become exemplary members of society. Opposite the "blacklist" is the "redlist" (where red symbolizes all things positive in China), which includes citizens and companies with a strong reputation. Placement on the redlist provides a range of benefits that positively impact everyday life. For businesses on redlists, rewards include: -  Simplified administrative procedures. For instance, "good" companies may enjoy faster customs processing, while redlisted taxpayers can submit tax returns through an accelerated program. - Reduced inspections. - Expedited approval of various applications. These measures help successful companies and citizens gain advantages and receive recognition for their efforts. The Role of Technology in China's Social Credit System: From Mass Surveillance to Internet Control Modern IT technologies are beginning to play a pivotal role in China’s social credit system. Specifically, artificial intelligence and facial recognition software are used alongside more than 200 million surveillance cameras across the country. These measures allow officials to monitor citizens’ daily lives and collect data to evaluate their behavior. This system has also helped reduce street crime to critically low levels. (Here in Shenzhen, where we are located, there is an abundance of electric scooters that people leave on the streets freely—electric scooter theft has virtually disappeared.) Beyond physical surveillance, the government monitors citizens’ online activities, identifying, for instance, the spread of anti-government ideas. Artificial intelligence aids this effort by automatically detecting and blocking unwanted content. Companies are also required to follow laws, as their online data can be used to assess their social credit rating. Breaches of contractual obligations can significantly impact this rating. It is important to note that public security and the social credit system are not yet fully integrated. “Blacklists” and “redlists” are manually compiled, and full integration with the national security system has not been achieved. What is Corporate Social Credit in China? China’s social credit system is heavily oriented toward companies. The main goal of the corporate social credit system is to create a publicly accessible database of companies that rates them according to specific criteria. This system is still evolving, but in the future, it aims to produce a "Comprehensive National Credit Score" that will provide an overall rating for companies across numerous parameters. Companies are rated based on their compliance with various government regulations, as well as their tax and other reporting obligations. To date, over 33 million enterprises in China have received a social credit rating. To check a company’s status, there is a key national database: CreditChina.Gov.Cn. How to Check Your Company’s Corporate Social Credit Rating Using CreditChina CreditChina is a search tool (accessible only from a Chinese IP address) that provides information on companies and individuals. Its assessments take into account:

• Basic company information, including the Unified Social Credit Code and all licenses and permits issued;
• Administrative penalties;
• Non-payments recognized by courts;
• Cases of tax evasion and fraud;
• Illegal import or export activities;
• Outstanding wage payments.

CreditChina includes databases of companies in “redlists” and “blacklists,” as well as companies with infractions. To check your Chinese business partner’s rating, you need either its Taxpayer Identification Number (TIN) or its name in Chinese:

1. Go to the CreditChina homepage.
2. Search for the company using its name (in Chinese characters only) or TIN.

In the Record, You Will See:

• The company’s administrative permits;
• Administrative penalties;
• Whether the company appears on “redlists” or “blacklists”;
• Whether the company appears on the list of infractions.

How to Check Your Company’s Status or Rating Using Other Databases NECIPS is another national database, though it is not as user-friendly as CreditChina. It offers the most comprehensive company report, as it gathers data from the majority of government sources. Companies should also check local databases in the regions where their Chinese partners operate, as well as specialized databases. These include:

• The tax database, which records instances of correct tax filing and payment;
• The environmental regulation database;
• The customs database;
• The procurement database.

Public Perception of the Social Credit System The social credit system continues to spark public debate here in China. Despite resistance from some Chinese citizens, the majority support the continued implementation of the social credit system. In one study, 80% of respondents approved of the system, with only 1% expressing strong disapproval. Although not all studies show such high levels of support, they all indicate widespread approval among Chinese citizens and businesses.  

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