3/16/2023 0 Comments Sesame credit![]() The dàng’àn 档案 is a set of records related to an individual within China, recording that individual’s “performance and attitudes”. For example, the hukou system, in place in its modern incarnation since 1958, registers households, controls internal movement within China, and assigns benefits to households depending on their rural or urban location. In the 20th century, public record systems have been developed to record the behavior and actions of ordinary individuals. Arguably, this was a rudimentary ‘social credit system’, albeit one applied only to civil servants, and without a precise ‘score’. It is within this dynasty that a meritocratic assessment and promotion system was applied across the imperial bureaucracy in order to achieve a well-functioning Chinese state. Though arguably ‘legalism’ won out, all three of these schools influenced the first imperial ‘Qin’ dynasty (221-206 BC). More specifically, through facilitating trust, the China social credit system supports the following goals ¹: In more recent years, policy development for the social credit system has moved beyond considerations of financial creditworthiness and compliance to encompass a broader notion of ‘trust’.Ī common theme in the policy documents establishing the social credit system is the term ‘ Chengxin‘, variously translated as ‘trustworthiness’, ‘honesty’, ‘integrity’, ‘sincerity’ or ‘morality’, depending on the context. The eventual ‘end-state’ of the system is a unified record for people, businesses, and the government, which can be monitored in real-time. The system began with a focus on financial creditworthiness, similar to credit scores used in western countries, and moved on to include compliance and legal violations. A high social credit score will be an indicator that a party can be trusted in a business context. The goal of the social credit system is to make it easier for people and businesses to make fully-informed business decisions. ![]() Plugged into a regulatory framework, the ‘China social credit system’ (also knows as ‘China’s Ranking System’) refers to a diverse network of initiatives aimed at enhancing the amount of ‘trust’ within Chinese society. The term ‘social credit’ ( 社会信用体 in Chinese and shèhuì xìnyòng tǐxì in pinyin) doesn’t have a precise meaning - rather, it is an intentionally broad and vague term allowing for maximal policy flexibility. In this article, we break down the China social credit system, as it has been developed to date, and aim to separate the myth from reality. Is there any truth to such rhetoric, and what does all this mean for businesses expanding into China? Western media outlets have spoken of the “ sinister social credit system” and a system of “ total control“. ![]() In 2018, former US Vice-President, Mike Pence, sounded the alarm bells about China’s social credit system, stating “China’s rulers aim to implement an Orwellian system premised on controlling virtually every facet of human life – the so-called “social credit score.” So, what is the China social credit system? If commentary in the western media is anything to go by, it is a somewhat mysterious and scary rating system. In June 2022, it was China’s latest five-year plan for the ‘rule of law’ within China, recent guidance from the State Council, and a draft Social Credit Law, which demonstrated the continued direction of the social credit system. The implementation of the system for corporations, known as the ‘corporate social credit rating’ is especially advanced: More than 33 million businesses in China have already been given a score under some version of the corporate social credit system. This has seen the deployment of the social credit system widely throughout China, with an estimated 80 percent of provinces, regions and cities having introduced some version of the system, or being about to do so. Up until now, development has been guided by a national policy document known as the ‘Planning Outline for the Construction of a Social Credit System (2014-2020)’. 2022 marked a new phase in the development and implementation of China’s social credit system (sometimes known as ‘SoCS’, or the ‘SCS’).
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