Photo: AFP
Photo: AFP

Opinion | Why India needs to be wary of China-style social credit ratings

We should build our own alternative solutions to the real problems such social credit systems solve

A recent update of the Google Maps app on your smartphone allows you to explore nearby restaurants, bars, attractions, shopping and suchlike.

However, if you are in China’s Hebei province, you can download the WeChat app that shows loan defaulters in a 500-metre radius around you. You could then easily avoid them. Or you could click on a person’s name and report any information you might have to the Hebei Higher People’s Court, which developed and launched the app last month. If the defaulter happens to be a business establishment like, say, a restaurant, you could choose to avoid it and uphold moral values of society. Obviously, you can share the information with your friends so that they know how morally upright you are and they too can do the right thing.

This is just one of the many pilot projects that are being implemented in China as part of the Xi Jinping government’s “social credit system". Thinking totally and thinking big as usual, Xi plans to bring everyone in China under the system by 2020 for the eminently laudable objective of getting Chinese people to trust each other. There will be “a government trust system, a commercial credit system, a social trust system and a judicial trust system" and, obviously, one ring, er, party to rule them all.

A number of the social credit pilots, both private and public (to the extent that such distinctions mean anything), involve financial credit rating. The inability of formal institutions to provide loans to individuals and small businesses, and of informal lenders to collect their debts seems to be a significant problem. So credit rating systems are bound to be popular. However, the Chinese government is going beyond such limited objectives.

Last October, James O’Malley, a British journalist riding the Shanghai-Beijing bullet train, was distressed to hear the following announcement: “Dear passengers, people who travel without a ticket, or behave disorderly, or smoke in public areas, will be punished according to regulations and the behaviour will be recorded in individual credit information system. To avoid a negative record of personal credit, please follow the relevant regulations and help with the orders on the train and at the station." Another pilot project, in a rural area, involves a person going around with pen and paper, marking up those who contribute to the community and deducting points from those who litter, are abusive, neglect their filial duties and so on. People with high scores get cash rewards and more groceries.

Many of these projects involve red lists and blacklists: being in the former is advantageous and makes life easier. Being in the latter could have you banned from purchasing an air ticket, renting an apartment or getting a job. You get the plot.

All this, of course, is reminiscent of the dystopian worlds described by George Orwell and Aldous Huxley. Last month, hedge fund manager and philanthropist George Soros described “Xi is the most dangerous enemy of the open society, (so) we must pin our hopes on the Chinese people, and especially on the business community and a political elite willing to uphold the Confucian tradition..."

Yet there is evidence that the social credit scheme, at least, is popular among the Chinese people. Bing Song, a Chinese scholar, argues that “China’s governance tradition of promoting good moral behaviour goes back thousands of years…a system that bolsters trust is seen by many Chinese citizens as necessary." In a large survey conducted last year Genia Kostka, an European researcher, found as many as 80% of the respondents in favour of social credit systems. The approval was higher among the richer, urban, and educated Chinese.

Clearly, there are sound utilitarian reasons to prefer a system that rates people and firms you deal with. As we move towards a gig economy, it becomes all the more useful. The star ratings on Ola, Oyo Rooms, Practo and Amazon, for instance, help us make informed choices.

However, it is possible that individually rational decisions, exercised freely, can create socially suboptimal outcomes. As we have seen in world history, voters can freely elect governments that then promptly dispense with democracy. It is possible for free people to create a collective dystopia in the pursuit of individual gain.

Whatever the Chinese prefer, the rest of the world must be on guard against the use of data to enforce compliance, conformity and morality, even for ostensibly reasonable purposes.

Even if governments don’t deliberately put social credit systems in place, it is possible that they perniciously enter our society. For example, a Chinese gig economy firm might come in with a cool new rating system that captures user behaviour on social media, e-commerce and credit card usage. Or a local startup might emulate a nifty app the founder saw in China. We can stop products, but we can’t—and shouldn’t—block ideas from spreading.

Given the entrenched social inequities in India and our propensity to use technology to double down on social customs, we should be extremely watchful on this front. Even as we keep a Chinese-style social credit system away, we should build our own alternative solutions to the real problems it solves. That way, we could both challenge illiberal ideas and better compete in the global gig economy.

Nitin Pai is co-founder and director of The Takshashila Institution, an independent centre for research and education in public policy.

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