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China’s Social Credit Score – Economic Genius or Killer of an open society?


by Arun Krishnakumar.



I am trying to book a Eurostar holiday, and I get told on their site that, I can't travel on Eurostar because I missed my credit card payment last week - Imagine a world where that could be true.

I walk into a Starbucks and I get a free drink because my mortgage payment was done on time - thanks to my direct debit. I could go on, but you get the idea.

China is working on a Social Credit Scoring system that could pretty much make life look like what I have described. For me, it's too intrusive. But in a world (within China) where Google has a single digit market share, thanks to censorship, nothing is intrusive (looks like).

The Chinese government claims that it needs the system to promote social and economic trust, and plans to launch the system by 2020. No wonder, China tops the world in AI patents. They are already piloting the system in several Chinese cities.

“allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step.”

- From the founding document of the social credit scoring system
The government's drive to get the social credit score underway is largely inspired by existing private setups like Sesame credit. Sesame credit is the credit system created by Ant Financial. Ant financial and Tencent have managed to create a universe of consumer data through their ecommerce and messaging offerings. And they leveraged that data to provide a wide suite of financial services. The worrying aspect is that the government's credit scoring initiative may tap into this data.
Economists highlight that China's growth, at least when compared to its neighbour India, has slowed down. It may not mean much at this point as China's economy is almost 4 times bigger. But the slowest growth rate in 30 years is something that has got the government thinking.
South East Asian countries like South Korea struggled to transition from input based growth to productivity based growth. In China's case, the labour force has maxed out, and now they are focused on driving productivity. Is this social score system designed to make people more productive?
In a survey conducted last year by a European researcher, 80% of the respondents voted in favour of this system. The challenge is that the social credit scoring system has a good chance of making the rich - richer and the poor - poorer. Getting on the economic ladder would be harder for the bottom of the pyramid. However the Chinese government chooses to look at it differently.

Keeping trust is glorious and breaking trust is disgraceful

Just that line sounds so binary and feels mutually exclusive and is an antithesis of an open society. Then there is this philosophical argument of what's more important? An egalitarian society where privacy is respected, or an ethical, moral, compliant and conformed world. There is no binary answer to that either.
Only time will tell if this system delivers the desired outcome - at least in a Chinese sense. Watch this space.

Arunkumar Krishnakumar
Arunkumar Krishnakumar
Arunkumar Krishnakumar is a VC investor focusing on Inclusion, a writer and a podcast host.
Daily Fintech.
dailyfintech.com

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Wednesday, February 27th 2019
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