What’s new about China’s new (draft) social credit law?
What’s new about China’s new (draft) social credit law?
WRITTEN BY ALEXANDER TRAUTH-GOIK AND PIERRE SEL
21 December 2022
In recent years, calls for national legislators to properly articulate the scope and function of the Chinese Social Credit System Project (SCSP) have grown louder. However, the Social Credit System Construction Law of the People's Republic of China (Draft Law), released in November 2022 falls well short of addressing many of the concerns raised by Chinese legal scholars and lower-level implementors. The document has been largely compiled from existing legislation addressing specific components of the project, and the dearth of unifying principles or connections between respective sections of the law suggests a lack of collaboration between responsible authorities. Rather than a definitive doctrine, the present Draft Law (which can be found here in English and here in Chinese) represents but one small and confusing step in the direction of substantiating the SCSP within Chinese law.
The lead-up to the law
In 2014, the Chinese State Council issued its Planning Outline for the Construction of a Social Credit System 2014-2020, which called on agencies across all levels of government to develop mechanisms to improve the ‘trustworthiness’ of a broad suite of social actors, including businesses, government entities, non-government organisations, and individual persons. In this document, the components of the SCSP were distinguished in terms of “government affairs integrity” (政务诚信), “legal affairs integrity” (司法诚信), “commercial affairs integrity” (商务诚信), and “social integrity” (社会诚信). Each of these pillars encompasses specific policy issues — different parts of the government bureaucracy are responsible for collaborating and innovating ways of addressing them.
The most consequential and well-known initiative coming from this initial policy experimentation has been a series of nationwide ‘Social Credit Blacklists’ that identify, shame, and restrain “untrustworthy” entities and individuals for breaking specific laws and regulations. Meanwhile, municipal governments have been charged with transforming the variable of ‘trustworthiness’ into more nuanced evaluative criteria, through the creation of their own respective blacklists/redlists. Systems for scoring and rating individuals that were previously developed by local governments were criticised for imposing harsh and illegal punishments on residents, and have since been downgraded. Aside from individuals working in certain industries (such as government agencies), participation is voluntary across most districts with reportedly low rates of citizen buy-in. A litany of commercial services now also exist that supply financial credit ratings and due diligence services for enterprises. Finally, credit-scoring systems for consumers, such as Ant Group’s Sesame Credit, continue to operate in somewhat of a legal grey zone. China’s Central Bank is currently pressuring tech companies like Tencent and Meituan into sharing users’ personal information with state-backed credit-scoring companies, but the move is being strongly resisted as there are limited business incentives for these actors to do so.
Authorities have prioritised unification rather than clarification, resulting in a jumbled document that leaves many questions unanswered.
The SCSP thus comprises a patchwork of systems, built upon different logics, guidelines, and scopes according to local priorities and interests. Hence, problems of fragmentation and vagueness continue to jeopardise the underlying logic and overall coherence of the entire project, prompting calls for the establishment of a Social Credit Law.
Legal research and work on the SCSP were included as an item in the legislative plan of the 13th National People's Congress Standing Committee in 2018. Two years later, a first draft of a comprehensive Social Credit Law was formulated for internal review. In March 2022, the leading agency responsible for the construction of the project, the Chinese State Council, affirmed that “the presentation of comprehensive and foundational laws on social credit” remained a major objective for the coming years. Thus, the present Draft Law is the culmination of a string of legislative efforts which have sought to clarify the project’s scope and function in relation to the Chinese legal system.
The Draft Law
Fundamentally, the Draft Law seeks to unify all the different initiatives across the aforementioned domains by systematically addressing each within a single piece of legislation. However, a lack of definitions for key terms including “credit” (信用) and “integrity/creditworthiness” (诚信) has resulted in a thoroughly patchworked document that lacks coherence. In other words, the effort at unification has been at the level of superficial form rather than essential substance.
Article 2, for example, defines ‘untrustworthiness’ as “conduct that is lawfully designated and confirmed by state organs as not complying with integrity”. The obvious question arising from this self-referencing definition is what ‘integrity’ exactly is. The lack of a definition is particularly striking as nearly half of the articles in the law reference this term specifically. For example, articles 12-56 detail the integration of ‘integrity’ evaluations and processes across a broad range of sectors — from social service provision, environmental protection, customs, advertising, government procurement, and judicial decision-making. However, most of these articles merely cite the issues and challenges faced by respective sectors and regurgitate existing measures already taken by the authorities responsible for them. Many of the articles in this section appear to be cut-and-paste from existing laws, providing no clarification about what ‘integrity’ actually means or how this nebulous concept is to be operationalised in governance.
Article 50, which calls on authorities to “expand the extent of publicity on examples of integrity and cases of untrustworthiness”, suggests we can expect to see a continued shaming of untrustworthy organisations and individuals, and praising of moral role models in the years to come. The government’s pronouncement of ‘(un)trustworthy’ labels represents an officially endorsed assessment of the quality of an individual or entity that goes beyond the traditional lawful-unlawful binary. The intention behind the wide dissemination of this information is to bring the public on board in the punishment of blacklisted actors. Article 91 of the Draft Law states that “other organisations and individuals may impose restrictions and restraints on credit information subjects with relatively poor credit”. Ostracising a blacklisted actor, terminating the financial side of the relationship, and pressuring them to repay their debts are three actions individuals have been observed to take to mutually enforce the logic of social credit blacklists. These external impacts are the direct and intended outcome of the reputational punishment that is imposed on actors labelled ‘untrustworthy’. The complete lack of attention to this consequential aspect of the project in the Draft Law demonstrates that courts, scholars, and legislators continue to ignore the adverse and unpredictable effects that widespread shaming under the SCSP can elicit.
Granted, later sections present some limited novelty about areas that have increasingly attracted legal focus in recent years. The section on ‘credit regulation’ incorporates the recent National Basic List of Penalty Measures for Untrustworthiness as well as the Catalogue of Public Credit Information which sets parameters around the input of credit records for individuals and companies. “Financial Credit reporting” (征信报告) — which refers to the records collected about a specific individual or company’s past financial behaviours and is used to determine the likelihood that such actors will fulfil their contractual obligations — has also been brought within the fold of the law. As in many other countries, the bulk of this data is collected and processed by banks and private financial institutions for assessments of financial risk and making decisions about borrowing and lending. As legal scholars have noted elsewhere, this section is likely better articulated as it is grounded upon a longer history of established law in China.
One thing the document makes clear is that progress on the project will continue under the existing bureaucratic structure. The State Council remains responsible for the overall planning and coordination of the project, while the National Development and Reform Commission (NDRC) and People's Bank of China (PBoC) remain responsible for oversight and guidance and for organising policy formulation and implementation. Municipal governments are still expected to establish social credit systems within their respective administrative region. Finally, other government departments in charge of specific sectors and industries remain responsible for establishing social credit mechanisms within their jurisdictions.
The long road ahead
The patchworked form of the Draft Law is indicative of it being the first central document since the 2014 Planning Outline that attempts to systematically address the plethora of initiatives associated with the SCSP. If the aim is to authoritatively integrate disparate SCSP policies and mechanisms, the present draft law falls well short of this mark. Authorities have prioritised unification rather than clarification, resulting in a jumbled document that leaves many questions unanswered.
This confusion is symptomatic of a broader issue recently cited by the State Council, namely the lack of coordination and collaboration between agencies responsible for different components of the project. As these components continue to evolve in their own directions, such coordination will likely prove increasingly difficult to foster. Doing away with a Social Credit Law altogether and legislating each field of the SCSP independently would provide much-needed clarity to these respective areas, but also undermine the effort that has sought to bring them together in the first place.
As other scholars have noted, up until now strategic ambiguity and plausible deniability have comprised fundamental design characteristics of the SCSP. These features allow for the initiatives subsumed under the social credit umbrella to be selectively applied and repurposed in the face of crises and unexpected challenges. Indeed, authorities have previously lauded the project as being a governance innovation that is “issue-focused”. These two core aspects of malleability and adaptability are threatened by the imposition of a national law that would establish the components of the project within definitive parameters and succinctly explain how they cohere together. While the SCSP is indeed maturing, this document suggests that authorities are sticking with the social credit status quo by allowing vagueness to prevail.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biographies
Alexander Trauth-Goik is a political science and sociology post-doctoral researcher at the Department of East Asian Studies at the University of Vienna. His current research as part of the Engineering a Trustworthy Society ERC programme focuses on the overlap and tension between the Social Credit System Project and other governance systems in China, as well as the impacts on citizens.
Pierre Sel is a PhD student at the Sinology department of the University of Vienna, studying the Social Credit System Project as part of the Engineering a Trustworthy Society ERC programme. Pierre previously worked at the French Embassy in Beijing and is the co-founder of EastIsRed, a China-focused advisory company. Image credit: Flickr/Harald Groven.