China is developing a nationwide scoring system that it benignly refers to as “social credit.” Think of it as similar to Western financial credit scores, except creepier and more comprehensive. More activities are monitored, and more benefits and penalties are doled out.

Actions that could hurt a person’s social credit score include taking up extra seats on a train or riding without a ticket, loitering in front of boarding gates, smoking in no-smoking areas, walking a dog without a leash or not cleaning up after them in public, wasting money on frivolous purchases, driving under the influence of alcohol, fighting with a neighbor, spending too much time playing video games, and spreading rumors online. Actions that could help a person’s social credit score include willingly taking care of ailing parents, giving to charity or donating blood, pushing children out of the way of oncoming traffic, and buying diapers (the idea being, if you’re buying them then you are a parent and therefore a responsible person).

The future is now, apparently. Pilot programs for social credit systems have already been tested in certain Chinese cities. Data is collected manually by municipal officials or given to administrators by companies with access to vast amounts of consumer information, whose participation will be vital when a nationwide program takes off, even if regulation is ultimately delegated to state entities such as the People’s Bank of China or the National Development and Reform Commission, as expected. That’s likely a conversation for a later day, though, since there’s no single scoring system at this stage of the program. Pilot cities are handling their own affairs and using their own scoring rubrics as they see fit.

If all this sounds Orwellian, that’s because it is. Yet there is a method to Beijing’s madness. The government is struggling to transform its economy from an export-oriented one into a consumption-based one, a process that necessarily requires finding new ways to extend consumer credit. The challenge for Beijing is that many Chinese citizens don’t even have a bank account, let alone a credit history, which has contributed to a variety of banking problems, most notably shadow lending. After all, it’s hard to persuade a bank to lend money to someone with no cash or collateral. It’s therefore incumbent upon the government to find a way to extend to bankless individuals the lines of credit they need to increase consumption. Social credit is a strange but not entirely illogical consequence of this problem because, unlike financial credit history, it measures behavior with data that already exists.

Punishment is where things get much shadier. To be fair, some of the social credit categories cover activities that are already illegal, like drunk driving. The social credit aspect simply adds another punitive layer onto the infraction. Other issues, however, including online rumor-mongering, are much murkier. Who’s to say what constitutes a malicious rumor and what does not? Big data will be instrumental in this regard, but the arbiter of acceptable behavior will, of course, be the Communist Party of China.


There’s precedent for how China will regulate things. In October, Planet Money, a podcast produced by NPR, interviewed a man who failed to repay a loan to a Chinese lender. He claimed that his business, a coal company, went into the red when Beijing altered its energy policy, which decreased the demand for coal and left him with a large, unsellable inventory. He ended up $1.5 million in debt that he was unable repay. So he planned to travel to Beijing, where he hoped his business contacts would help him establish another business that would earn him enough money to pay off his debts. But when he tried to book a ticket on the high-speed train to Beijing, he was unable to. Instead, he had to take the 14-hour train. He was then prevented from booking certain hotels in Beijing prior to his arrival. And when he finally got to Beijing, he saw his name, face and ID card on an electronic billboard, next to words that read “This man is untrustworthy.” Apparently, he was on what’s called the blacklist, which is maintained by China’s Supreme People’s Court and, if the story is true, carries some not-insignificant repercussions.

For now, ending up on the blacklist appears to be a result of financial transgressions rather than social ones. Yet the blacklist hints at how China would manage a nationwide social credit program, as do some of the punishments issued by local ones. Travel restrictions seem to be an early favorite. An AP article from March said that 17.5 million would-be air travelers were blocked in 2018 from buying tickets because of their low social credit scores. Other travelers have been blocked from buying business-class train tickets, which are considered a luxury expense that those in debt shouldn’t be allowed to make. Other examples of penalties issued from local social credit programs include prohibitions from staying at certain hotels, slowed internet speeds, inability to acquire certain senior management positions, the prohibition of children to attend certain schools, and, of course, diminished access to actual credit.

On the flip side, engaging in activities deemed beneficial by the government can boost people’s social credit score. Those with positive scores receive benefits that include better terms on bank loans, faster check-ins at hotels and airports, travel abroad with fewer supporting documents, free medical check-ups, more rice and cooking oil from village committees, and discounted heating during the winter.

Media coverage of social credit from China is, unsurprisingly, far more positive than it is in the West, which has criticized the intrusive surveillance the system depends on. Chinese news agencies may well be toeing the party line, but there’s anecdotal evidence to suggest a warm reception among Chinese citizens. Some say it makes doing business easier. Others say it engenders trust.

There have also been complaints. Critics say debt forgiveness is too slow and that people are losing their seats to those with better social credit scores. Others just want to smoke where they want to. The norms attempting to be established go beyond financial aspects into the social and political realm as well.

Others have complained that it just adds an extra layer of bureaucracy (not to mention untold new opportunities for graft), since social credit documents are now required in addition to all other documents to get loans or complete other daily activities that require government oversight. Those complaints are not without merit. Beijing, too, is worried that the system will be exploited by corrupt officials, or that it will be used to settle personal scores, further undermining public faith in the state.


And that sentiment helps to explain why Beijing is doing all this in the first place. The government’s official explanation for why it needs a social credit program focuses on the need for some sort of credit score. It claims that, given China’s rapid development, it has not had enough time to develop a credit system comparable to what exists in the West or instill trust in business transactions. Fixing this “trust deficit” is essential to the consumer economy Beijing means to create. Because it requires giving consumers access to credit, it also requires a way of determining the reliability of those consumers.

Trust is important, but beyond the official explanation, the social credit system has an ulterior motive: to introduce new norms to Chinese society – norms that could make China’s social identity much more pliable to new things. As China’s growth slows, and as it faces the challenges posed by its myriad financial problems, the CPC knows its opportunity to implement large-scale changes – that is, before it faces greater risk of central power being eroded – may be brief. Before the problems of tomorrow become the crises of today, Beijing must attempt to establish norms that condition people to behave in ways it deems more appropriate and socially beneficial, so that the consequences of misbehavior become familiar, and heavy handed penalties, though still used, are less often required.

If Beijing successfully implements this new system, change may be inevitable. An automated, nationwide social credit scheme, the knowledge that the government is watching everything all the time – with the power to penalize people unilaterally, no less – will invariably change people’s behavior. This type of monitoring is not new or novel in China, which has long promoted the good of society over the good of the individual. It’s merely a new application, one that Beijing hopes will be able to efficiently keep tabs on a variety of activities, reinforce existing rules and create a space for new norms to take hold. (It’s worth noting that even with the assistance of new technologies, not everything can be micromanaged from the top down. Imagine a person is unable to pay a bill because of an emergency trip to the hospital. Would they be able to mitigate the damage to their social credit caused by an injury they couldn’t predict? Even in an entirely autonomous system, issues such as this will require a human to talk to. In any case, even the nationwide system is described as a hodgepodge of lots of local ones with national oversight.)

The value of norms is difficult to overstate. They are indispensable to how much a society functions and fails. Some of China’s most prosperous and stable periods came when Confucian principles were widely applied and promoted. With religion effectively banned, and with a decadeslong emphasis on financial gain, the CPC knows it has a sort of spiritual vacuum to fill – hence President Xi Jinping’s renewed push for communist ideology. Social credit scores are intended, at least in part, to keep society functioning as the god of personal enrichment increasingly fails to endow blessing on the flock.

Xander Snyder
Xander Snyder is an analyst at Geopolitical Futures. He has a diverse theoretical and practical background in economics, finance and entrepreneurship. As an investment banker, Mr. Snyder worked in corporate debt origination and later in a consumer-retail industry group at Guggenheim Securities, participating in transactions ranging from mergers and acquisitions, equity and debt capital raises, spin-offs and split-offs to principal investing and fairness opinions. He has worked on more than $4 billion worth of transactions. He subsequently co-founded and served as CFO for Persistent Efficiency, an energy efficiency company that used cutting-edge technology to create a new type of electricity sensor for circuit breakers and related data services. In his role, he was responsible for raising more than $1.5 million in seed capital and presented to some 70 venture capital and angel investors in the process. He also signed four Fortune 500 companies as customers, managed all aspects of company accounting, budgeting and cash flow, investor relations, and supply chain and inventory management. In addition to setting corporate strategy, he helped grow the company from two people to a 12-person team. As an independent financial consultant, Mr. Snyder wrote an economics publication for a financial firm that went out to more than 10,000 individuals and assisted in deal sourcing for a real estate private equity fund. He is an active real estate investor and an occasional angel investor. Mr. Snyder received his bachelor’s degree, summa cum laude, in economics and classical music composition from Cornell University.