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China’s social credit poses rising risk to CEOs

Published: December 17, 2018
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Source: Reuters

HONG KONG (Reuters Breakingviews) - China’s “social credit” system is another worry for executives, as tensions spike over the arrest of a Huawei executive at U.S. behest. The government’s plan to blacklist people and companies for misbehaviour is widely misunderstood. But its implications for business should raise eyebrows. By holding executives accountable for their company’s misdeeds, it blurs the already fuzzy Chinese line between corporate and personal interests.

Unlike financial credit reports, the central government does not plan to assign a numeric score to individuals or companies – although some local governments have experimented with them. Nor is it a tool targeting political dissent per se. The social credit system is better understood as a loose collection of initiatives, in part aimed at improving the enforcement of existing laws. Yet the punishments proposed, in particular the use of blacklists, are cause for concern.

Most of the blacklists apply only to specific industries. Trying to open the emergency door on a plane, for instance, could get offenders excluded from air travel. Select circumstances, however – such as defying a court order for payment – entails wider blackballs extending to children of violators, who might be barred from attending private schools. When the offending entity is a company, some executives and legal representatives could be blacklisted personally. Jia Yueting, the high-profile founder of troubled tech startup LeEco, was publicly banned from planes after he defied an order to return from the United States to China to settle debt problems.

The social credit system poses additional risks to foreign companies. Take the tiff between U.S. airlines and China’s civil aviation agency earlier this year over their labelling of Taiwan as a “country” in ticket-booking systems; Beijing considers the island a breakaway province. If a court had fined the airlines and they refused to budge, it’s conceivable their China-based managers might have been placed on a do-not-fly list, or seen their children kicked out of private school.

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China’s social credit system is in full swing and has already blacklisted more than 15 million Chinese residents from travel. Is it coming soon to the U.S.?

George Orwell’s 1984, Black Mirror S03E01, Psycho Pass, The Orville and many others have all theorised how technology can make our lives better… or worse.

China’s “Social Credit System” – which is expected to be fully operational by 2020 – doesn’t just monitor the nation’s almost 1.4 billion citizens. It’s also designed to control and coerce them, in a gigantic social engineering experiment that some have called the “gamification of trust”.

China said it will begin applying its so-called social credit system to flights and trains and stop people who have committed misdeeds from taking such transport for up to a year.

Imagine a society in which you are rated by the government on your trustworthiness. Your “citizen score” follows you wherever you go. A high score allows you access to faster internet service or a fast-tracked visa to Europe. If you make political posts online without a permit, or question or contradict the government’s official narrative on current events, however, your score decreases. To calculate the score, private companies working with your government constantly trawl through vast amounts of your social media and online shopping data.

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