China’s Tight Grip on Enterprise Will Influence Decisions Based on “Social Credit System” Built Through Surveillance of Businesses, Citizens

BEIJING – China is building a national reputation system it calls a “Social Credit System” which is intended to evaluate and calculate a reputation score based on behavior and habits of its businesses and its people. The system will assign an overall score which can then be used to allow or restrict access to certain activities.

The system will be one unified system and there will be a single system-wide social credit score for each citizen and business. By 2020, the national social credit system is expected to be in full swing with tests completed that have already successfully limited access to travel.

The Chinese government has published numerous documents and plans since 2014 and expects the Social Credit System, if implemented as envisioned, will constitute a new way of controlling both the behavior of individuals and of businesses.

Possible punishments as a result of bad ratings include:

• unfavorable conditions for a new loan
• higher taxes than compliant competitors
• no permission to issue any bonds or invest in companies listed on the stock market
• decreased chances to participate in publicly funded projects
• mandatory government approval for investments, even in sectors where market access is not usually regulated

In severe cases a businesses high-level manager’s individual credit ratings could be affected or company’s manager could be denied tickets for high-speed trains or for international business flights.

The social credit system goes beyond just business compliance and practices by measuring how citizens act and behave in their personal lives.