China's Social Credit Scoring: How Does it Work?

Posted by Jamie Mackenzie Smith in Credit Score on 10 May 2018

Launched in 2012 and expected to be fully-implemented by 2020, China’s Social Credit System (SCS) could be described as at best an invasion of privacy and at worst a simple case of unabashed state-controlled oppression. Based loosely on the principles used in traditional credit scoring, this system goes several steps further to score you as a citizen and assesses how much you contribute to/hinder society.

Linked to a mobile payment app that’s widely used in China (similar to Apple Pay or Google Wallet), the system builds up a profile of each individual and what they’re spending their hard-earned Yuan on. The app is also connected to a social media profile and can be linked to a driving license and car registration.

This inter-connectivity allows the country’s CCTV systems to spot deviant acts, and using facial recognition software to locate any individuals involved, ‘points’ are accordingly deducted from their social profile. By encouraging individuals to pay for goods and services via the app, it also builds up an idea of spending habits fairly quickly as well.

In a way, this all-encompassing approach to linking your finances with everyday activities is similar to what open banking has hoped to achieve. Unlike open banking (which you can be forgiven for not having used) there seems to be no escaping China’s social scoring and it’s only set to escalate in the lead up to 2020.

How do you ‘gain points’ in China’s social score?

The alleged overarching reasoning behind China’s foray into social scoring is to help promote the values associated with being an upstanding member of the public. As many observers have pointed out though, the whole thing is more than just a little bit ‘Orwell 2.0’, especially as the scheme is expected to be rolled out across the entire country within the next two years.

The moral thinking behind the system means that if you do things that are perceived to make you a ‘good’ citizen, you will be rewarded with a higher score – so pay your bills on time, obey the law and make sure you don’t publicly criticise the government, and you should have nothing to fear.

Things that will improve a social score:

  • Paying bills on time
  • Buying Chinese-made goods
  • Praising the government on social media
  • Being friends with other high-scorers on social media
  • Donating to charity
  • Looking after your family

Like traditional credit scoring in the UK, the higher your rating, the more likely you are to be able to access certain benefits. For us that would mean easier access to credit and lower interest rates. A better credit rating could also mean you can access benefits such as airport lounge access, cashback or frequent flier miles via certain ‘rewards’ credit cards.

In China, the benefits of having a higher social score will be slightly more varied to reflect the wider range of things that factor into building the score. For those that qualify, these perks make life that little bit more comfortable.

Potential perks of a good social score

The incentives for ‘playing the game’ can be quite compelling: if praising the government on social media meant free Ford Mustang rental, it’s reasonable to expect that we’d see a marked increase in people posting #XiJinpingisgreat before going to sleep each night.

But when it comes to motivation, every carrot dangles from a stick and if you’re not won over by the benefits, you might be more influenced by the thought of what happens to the citizens with a low social score.

How do you lose points?

Unlike credit scoring in the UK (for the most part), what you can be penalised for is not restricted to your borrowing and repayment history. If you act in a way that is deemed untoward to your fellow countryman, you could soon start to find life getting that little bit less comfortable.

In a bid to encourage greater integration within society, your behaviour can be monitored and, if necessary, punished by lowering your score and in some instances by receiving an on-the-spot fine via text message.

Things that will harm your social score:

  • Bad driving
  • Playing video games
  • Befriending people with a low social score
  • Jaywalking
  • Smoking in non-smoking areas
  • Leaving a bike on a footpath
  • Insincere apologies
  • Playing God

This is tracked in a number of ways; purchasing items via the payment app will show your purchase history, your linked social media account will give an insight into the company you keep and good old-fashioned surveillance cameras with identity recognition software (also linked to your social media account) will take care of the rest.

Potential punishments for a bad social score:

One reason that the SCS is described as ‘still in progress’ and ‘not yet fully rolled out’ is that only a few of the perks and drawbacks are live. But already the effects are apparent: last year as many as 17.5 million Chinese citizens were unable to buy airline tickets and a further 5 million barred from rail travel because they are named on a public blacklist which takes its information from this scoring system.

Is it working?

As you might expect, the system has been hailed as a success by some people, and a hindrance by others. Perhaps the easiest distinction to make would be: those embracing the system are feeling the benefit while those who have not are feeling its full force.

Some of China’s citizens have openly said that they are very pleased with the system, but it can be hard to take that kind of endorsement at face value when criticising government policy leads to a lower social score and quality of life takes a hit as a result.

Parallels to regular credit scoring

If China’s social scoring system seems excessive, that’s probably because it is. But if elements of it sound familiar, that’s because they echo some of the basics of credit scoring that have been used in the west for decades.

The reason behind this is most likely because the scoring system has been developed by Alibaba, a Chinese group that specialises in online money transfers and E-commerce. They have their own credit scoring system called Sesame Credit, which expands on the fundamental principles used by Credit Reference Agencies around the globe.

The most obvious similarity is the positive impact of paying bills & taxes on time – failure to do so may harm your rating and restrict the availability of other forms of finance in the future. The similarities don’t end there either: financial associations can affect your own chances of getting credit (for better or worse), a good credit history can help bring down insurance costs and the information on your report can make a big difference to the outcome of a landlord or employer check.

Though their existence is something of a myth in the UK, the idea of a credit blacklist is hardly new either.

The main difference? Well, your credit report doesn’t care how bad a driver you are or how many hours a day you spend playing video games. It is formed from information that lenders deem useful to determine how likely you are to default on a payment if they lend you money. Nothing is hidden, nothing is nefarious and nothing is on there that should prevent you from having a good quality of life.

You can see everything that is reported about you by four Credit Reference Agencies by checking our multi-agency report. If you haven’t already, you can try checkmyfile FREE for 30 days, then for just £14.99 a month afterwards, which you can cancel at any time.

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