China’s Social Credit System: a governance model in the era of Big Data?

In recent years, People’s Republic of China is progressively engaging Big data and Artificial intelligence to reshape its economic and social governance. Nevertheless, the decision of Chinese government to develop a national reputation system by 2020 sparked conflicting reactions. Based on advanced Big data technologies, the Social Credit System is settle to monitor and rate the economic and social conduct of Chinese companies; even if for to the national leadership this project will strengthen social loyalty and trustworthiness in market exchanges, large opinion looks at the plan as a State surveillance tool and mass disciplinary machine.

According to the Planning Outline for the Construction of a Social Credit System (2014-2020) issued by the Chinese State Council, the pivot of the reform is to foster “honesty in government affairs”, “commercial integrity”, “judicial credibility” and “societal integrity”. The Social Credit System is thus presented as an important channel to improve the socialist market economy, by automatically generating standards and creating business opportunities in China. It is rather clear that foreign businesses operating on the Chinese market would be treated at the same way as the local companies as well; this means that sensitive firms data will be in the hands of a foreign State and, obviously, that enterprises must adapt their behavior to the Chinese standards in order to not be discriminated from that market area. Freedom of action would be substantially downsized, since foreign companies would be forced to comply with Chinese guidelines before any action they intend to undertake; but on the other side, shared data would serve enterprises in term of respective loyalty and available information of the market needs and inclinations.

Even if the reform is a “top-level design”, the role of the central authorities would be reduced to gather, monitor and publish the information of everyone. The real players of this plan are State-licensed commercial data bodies as Alibaba, Baidu or Tencent; these corporations run all the social networks in China, therefore they have access to a vast amount of information about people’s social activities and interactions. The data will be then converted in a score between 350 and 950, in according to the government standards and published on the National Credit Information Sharing Platform. The rewards of having a high score includes easier access to loans, visas, public procurements or discounts in purchasing some goods and services; conversely, a low rate would imply negative effects as bans from commercial partnerships and job offers, or restrictions to participate in publicly-funded projects.  

The rating system is “social”: its trait is not strictly economic, but even the social, political and environment attitude contribute to set the final score; in other terms, a company will get a lower rate not only if it does not pay its loans back in time, but even if it does not observe emissions targets, intellectual property standards or work safety rules.  

If implemented, the Chinese Social Credit System will potentially become the most advanced and sophisticated model of market regulation built around Big data and IT technologies. Additionally, public and shared information would foster business trustworthiness and contribute in creating social and environmental responsible behaviors. The system, thus, would turn into an important governmental tool not only in monitoring the economic trend, but also by progressively dealing with China’s social, environmental, political requirements at the national and international level.

Innovative technologies are progressively rewriting the rules of human relationships. Even if we are aware of the advantages brought by digital revolution, we need to understand how “distributed trust” is built, managed and lost in the new emerging era. Whether Internet freedom has been the flagship of relationships in the liberal democratic societies, providing citizens with new access to information and magnifying powers of expression, Big data revolution seems to play better its role in the authoritarian regimes. China’s Communist Party seems to have seized this opportunity since is systematically adapting technological innovations to its major national strategies.

In order to understand the Chinese Social Credit System, we need to understand China before. Confucianism is at the basis of society while corruption is one of the main public’s top concerns. The Social Credit reform, hence, lies on Xi Jinping’s strategy to eradicate corruption from the harmonious and hierarchical Chinese society. In addition, the  top-down approach meets with an enthusiastic bottom-up for innovative technologies.  

Beijing’s tactics is the fitting proof that Big data innovation can spawn its best results in a centralized system. In principle, Western countries conceive Big data to respond to security needs; anyway, few States have redefined their system in compliance with the Big data revolution. Technologies able to gather and hub data sounds like a nightmare for proponents of a free and open society but are the perfect dowel for regimes focused in maintaining order. Chinese leadership is confident that State-controlled enterprises and banks can operate more efficiently and loyally in a Big data framework than private companies in self-ruling markets, as assessed by liberal economists.  

The Chinese strategy offers us a stimulating cause for reflection: what can Western liberal democracies do to deter a scenario where they are actors, not directors in the Big data era? Disregarding this development and remitting its trend to the market course is not a valid option at a time when other States appeal to these innovative technologies to adjust their economic and social governance.

If People’s Republic of China will be effectively able to set up a top-down ruling system anchored on Big data, which proves to be responsive, politically compelling, economically advantageous and socially sustainable, has the potential to become a global model. Western democracies must not fall behind and urgently adjust their ruling strategies and systems. New or improved frameworks are required in order to introduce effective policies and lead society to benefit from the revolution of Big data. Moreover, in liberal democracies arrangements should be settled and advance on the basis of a mediation between evidence-based proposals and citizens’ participation.

A coordinated European approach is essential for the development of the data-based economy and society. Further to establish appropriate data management infrastructures, program capabilities and large-scale analysis approaches, European governments must promote more sophisticated economic policies, protecting small businesses and increasing the competitiveness of the larger ones. The improvement of the European Data economy was one of the three emerging challenges identified in the mid-term review of the 2017 Digital Single Market Strategy. Further to the Communication on Building a European Data Economy, in September 2017 the European Commission proposed a draft regulation of the EU free flow of non-personal data and for 2018 is expected to be launched an initiative on accessibility and re-use of public and publicly funded data.

The ultimate step would be the fulfilment of transnational standards in the Big data era. Today less than tomorrow, international economic competition as well as global social targets cannot to leave digital innovations out of their development. The prospect for every State to have strong credit and social system will rely upon the processing and integration of data that fuel it, but as well on the readiness of government in constantly reshaping their attitudes and harmonizing patterns and goals with each other.

The search for balance between privacy of individuals and competitiveness of multinationals is the existing dilemma of public politics; at the same time, Big data are intended as a powerful tool to understand ecosystem complexity and be exploited to pursue short and long-term targets. An integrated approach, able to merge both the perspective of other States and private stakeholders, is essential in order to advance adequate models of governance able to face the present and future challenges.