October 11th, 2015
As a boy scout as a kid, we used to play a game around campfire. The adult would form two teams and make two lines with 10 kids. He would the whisper the same exact message to first kid of the two teams, whereby they would repeat it to the next kid and so on until the last kid have to write the message down on paper. We always have a good laugh what comes out at the end compared to what went in.
“Citizen Score” is what happens when official news gets reposted, added with the journalist opinions, mixed in some new information (relevant or not), and repeated the process 10 times. To make it worst, most journalists in the process didn’t bother to, or was not able to do fact checking as the source is in Chinese.
Anyway, here is what I know:
1) The origin of these is State Council Notice (2014) No. 21, concerning the guidelines to building a Social Credit System (2014-2020) (国发〔2014〕21号《社会信用体系建设规划纲要（2014—2020年）》)
Accelerating the construction of a social credit system is an important basis for comprehensively implementing the scientific development view and building a harmonious Socialist society, it is an important method to perfect the Socialist market economy system, accelerating and innovating social governance, and it has an important significance for strengthening the sincerity consciousness of the members of society, forging a desirable credit environment, raising the overall competitiveness of the country and stimulating the development of society and the progress of civilization.
Translated into English, the motivation looks very nefarious.
Reading official documents is an excellent test of the political awareness of the reader. Every reader has his own understanding, each is right at his own level. However, simple reading is most certainly the wrong interpretation, especially if the words get translated without the context.
CCTV Chinese News is as boring as hell, but if you ever watch it with someone who is well-verse with Chinese political environment and can explain to you the context behind each story, you will find CCTV News more interesting than House of Cards.
Very often, Chinese would trust a Western stranger over a Chinese stranger. This is why Chinese depends on relationships or “Guanxi” to do business.
A Guanxi-based society, in a positive light, means you prefer to do business with people you know or people you trust recommended but it also gives rise to multiple other problems, corruption been the top of the list. It is also not a scalable as one cannot only do business with your circle of friends.
For most Western society, since it is a high-trust culture, solving the “credit worthiness” is about the balance of privacy and transparency specifically on personal financial credit worthiness. This gives rise to credit bureaus whose key role it to assets credit rating of a person or business.
But in Chinese society, where there is low level of trust, assessing someone credit worthiness is more than financial, but also the his position in the society, his friends, and his political alignment (and sad to say, is a real risk in China). This is why it is called “Social Credit System”, or a way to turn “Guanxi” into a rating.
2) Mayi Financial (蚂蚁金服) and JD.com P2P Lending (京东白条).
Mayi Finance is a subsidiary of Alibaba and JD.com is invested by Tencent. Both are billions dollars company that compete in Internet Finance (FinTech) in China, a new brave frontal that has thousands of startups in China alone.
One Shanghai Internet Finance startup I invested did over 10m yuan of transactions in the first 48 hours of launch. It’s obvious how big an opportunity for big businesses and how big a headache it must be to government regulators.
In July 2015, People’s Bank of China issues Notice (2015) No. 221, Guidelines to promoted healthy development of Internet Finance (银发〔2015〕221号《关于促进互联网金融健康发展的指导意见》)
Promote the construction of a Credit System foundation that Internet Finance companies could rely upon. Such Credit System should support Big Data Storage, building upon Network and Information Security technologies. Encourage companies to share credit information legally.
In Dec 2014, Alibaba’s Alipay decided to have a bit of fun letting users check how much they spend accumulative in 10 years, and that you rank with your friends.
It does not take long for them to figure out these Big Data they have on the users spending on Taobao over the years could be an excellent data points to assets a person credit rating that could complement Mayi Financial.
This is when they launched Zhima Credit System (芝麻信用) where they would provide a rating between 350 to 950 based on a set parameters, including how much they spend over the years, what they spend on, how many disputes. They also collect data from social networks, recruitment sites, match making sites, logistics, search engines, and so on compiling a comprehensive profile of a person. And then, they made that available as a public service that would make anyone who has a faintest idea of privacy goes “WTF!”
To make such credit system useful, Alipay provides credit lines (backed by Mayi Financial), the higher your rating, the more credits you get. And they also negotiate VISA waiver, or more accurately, in lieu to submit your personal banking financial, property ownership etc during VISA applications, so Chinese users could obtain VISA easier.
JD.com P2P Lending (京东白条) name comes from a Zhejiang’s practice, where businessman would lend money to each another based on a written promissory on a white piece of paper (白条). No collateral, no guarantor, just a piece of white paper saying how much was lend, what is the interest rate and when it shall be return. It works within a small circle of friends (See above on Guanxi) in Zhejiang where everyone knows everyone, and everyone helps out each another especially competing in “outside” business.
But when JD.com extends such business norm to a nation-wide scale, there comes a point where you have to assess the credit rating of a person. JD.com is the number 2 e-commerce site in China so you don’t need to be Sherlock Holmes to deduct what they did.
To quote Hanlon’s razor : “Never attribute to malice that which is adequately explained by stupidity.”
In this case, the stupidity of Alibaba and JD.com, or their lack of privacy considerations is worrying. The Chinese government in comparison has more understanding of citizen privacy than most of the Chinese enterprise. But I don’t think the what Alibaba and JD.com is doing with their credit rating is a result of any direct Chinese government intervention.