Rule of law vital to construction of social credit system

By WANG XIAOMEI / 07-01-2020 / (Chinese Social Sciences Today)

 A group of girls display their scores on Sesame Credit, a credit rating system developed by Ant Financial, a subsidiary of the internet giant Alibaba. Scores on the system offer reference on the social credit of its users. Photo: FILE

The healthy and stable development of the economy and society necessitates the construction of a social credit system. In the face of an increasingly diverse population and an increasingly complicated market and society, the government’s traditional regulatory means has been hard to sustain, highlighting the need to build a new regulatory system centered around credit to modernize state governance.

According to an outline issued by the State Council in 2014, China plans to build a government-led national social credit system by 2020. Since the 18th CPC National Congress, the development of the comprehensive rule of law has been fast tracked, while the construction of the social credit system has made rapid progress.


Progress and opportunities
Against the backdrop of the all-around deepening of reform and rule of law, the construction of the social credit system has embraced unprecedented opportunities. The strategic position of big data has been established, state organs have been profoundly reorganized as a result of the transformation of government functions, all sectors and industries have been more and more informatized and digitized, government and judiciary affairs have been increasingly transparent, and the court has stepped up punishments for people with poor credit. Social credit system construction has been in full swing on both central and local levels.

The Shanghai Social Credit Regulations enacted on Oct. 1, 2017, was the first comprehensive local statute in China regarding the construction of the social credit system. It stipulates the collection, sharing and use of social credit information, incentives and restrictions, the protection of the rights and interests of information subjects, and the regulation and development of the credit service industry. 

Driven by the move in Shanghai, other places quickly followed suit, such as Xiamen in Fujian Province, Suqian and Nanjing in Jiangsu Province, and Guangdong Province, which have formulated or are formulating social credit regulations. A national-level social credit statute is reportedly in the making.
Moreover, a public credit information exchange and sharing platform has been set up. In 2015, sponsored by the National Development and Reform Commission went online as a national public credit information exchange and sharing platform. In October 2017, the website was restructured and optimized, further enriching its information content and providing one-stop services for the public to retrieve credit information.


Third, local credit construction has achieved remarkable results. With the release of the Outline for the Plan of Building the Social Credit System (2014–2020) by the State Council, more and more places have conducted trials in system construction, issuing black lists to reject dishonest subjects for taking high-speed trains and obtaining financial services alongside red lists to offer honest subjects tax cuts and preferences for government services. At the end of 2017, twelve cities, including Hangzhou and Nanjing, were rated as first model cities for the construction of the social credit system.

In addition, market credit systems have been extensively applied. Apart from government-led public credit systems, the application range of market credit systems developed by commercial firms has been expanding. In January 2015, the People’s Bank of China ratified eight private enterprises as social credit pilots. Representatives of market credit systems are Sesame Credit and Tencent Credit, which have been widely applied to many real scenarios.

Last, a unified social credit code system has been created. The aim of gathering public credit information is to build a complete and three-dimensional credit archive. In May 2016, the State Council released a notice approving such departments as the National Development and Reform Commission, the Ministry of Civil Affairs and the State Administration for Industry and Commerce to build a unified social credit code system for legal entities and other organizations. The move was aimed at building an all-encompassing, stable and sole code system.

By the end of March 2018, 99.8% of national legal entities and other organizations had been converted to new codes, with 82% of their licenses renewed. The code conversion rate of individual businesses attained 95%. All these have laid an important foundation for the collection and sharing of social credit information.

The first problem facing the social credit system is its weak credibility. The system consists of a public credit system and a market credit system. The former should be established by local governments and industry sectors, and the latter by various enterprises, trade organizations and third-party credit service agencies. The objectivity and fairness of the market credit system can be easily questioned due to limited users and opaque credit rating practices. Because of the difficulty of reconciling diverse local standards, in addition to local interest protection, it is also hard to guarantee the credibility of the public credit system; however, it is superior in its legal support of credit information collection, as well as information objectivity, accuracy and authoritativeness.

Second, the data sharing system is defective. In the information age, open data is an unstoppable trend. Open data is shared in two directions: between public departments and from public organs to society. In terms of data sources, data available for the management and service of public departments comes from their relative subjects. It is public data and should be open to the public except for legally confidential information. However, managers of some departments are so conservative and narrow-minded as to keep the data for their own departments, making information sharing deficient or incomplete, which will directly affect the establishment and improvement of the social credit system.

Third, the definition of credit information is unclear. What information is credit information or standards should be used to define credit information should be made explicit in the construction of the social credit system. There are legal and moral standards for judging credit. Based on the black and red lists issued in local credit management documents and on credit platforms, the Chinese social credit system features a mixture of legal and moral standards. Legal standards are objective. Criminal information, determined on the basis of legal procedures, has authoritative and unequivocal identifying qualities. On the contrary, moral standards are highly subjective. With a large space for discretion, some organs might commit corruption when identifying credit information.

Besides, attention should be paid to the dishonesty of some government officials. Compared to ordinary people, civil servants and public legal persons are more obliged to perform duties specified in legal documents. In March 2012, local courts launched a nationwide campaign to clear up long-pending cases concerning Party and government officials’ failures to execute legally effective orders from people’s courts, laying stress on the misconduct of government officials.

Additionally, there is a lack of legal remedies for punishments of dishonest behaviors. The social credit system includes a dishonesty disclosure mechanism and a dishonesty punishment mechanism. In a country under the rule of law, where there is a right, there is a remedy. There should be channels for legal relief when a subject is facing unfavorable legal consequences. Whether administrative or criminal punishments, they are determined by specified organs based on legal procedures, and the punishments should be remedial. However, how to provide subjects under punishment for dishonesty with legal relief is not clear legally and practically.


In a different development stage from the West, China follows a distinctive model and path from Western countries in the construction of the social credit system. With a relatively sound legal system, mature market economy and profound credit culture, Western countries focus on the prevention and management of risks in credit transactions, so the credit service industry is developed in these nations. By contrast, China is transitioning to a mature market economy and the problem of lacking social credit is particularly prominent, underscoring the urgent need to establish a public credit system. To make the social credit system more universal, authoritative and credible, it is essential to build a national unified social credit system covering all credit subjects, all types of credit information and all regions. 

Opening up public data is a natural extension of disclosing government information. It should be a legal obligation of the government. Efforts should be made to eliminate data protectionism and break the information monopoly and blockade of some sectors to build a public data opening system, regulating and ensuring the opening and sharing of data sources and setting up a big database shared by all. In 2018, Shanghai was the first to release administrative measures on open data, raising general requirements on publishing public data. The Administrative Measures of the Shanghai Municipality on the Opening of Public Data took effect on Oct. 1, 2019. As the first special law for publishing data, the Administrative Measures has provided examples for national legislation.

It should be legal standards, rather than moral standards, that define credit information. In a law-based society, any subject shall not be evaluated negatively if it never breaks a law. Fundamentally, the construction of the social credit system is a legal behavior. The ultimate goal is to identify dishonest subjects, not moral models, so the social credit system should not turn into a moral archive for citizens or enterprises.

To strengthen the supervision of public servants, the Several Provisions of the Supreme People’s Court on Issuing the List of Dishonest Persons Subject to Enforcement promulgated in 2017 pointed out that people’s courts shall report the misconduct of state functionaries, deputies to the National People’s Congress and members of the Chinese People’s Political Consultative Conferences to their working units and related departments, and report that of state organs, public institutions and state-owned enterprises to their superior administrative units, higher authorities or organs that perform as their investors. Apart from supervision by unit and on all levels, dishonest behaviors of special subjects should also be made public and subject to social supervision.

In the future, it is necessary to legally specify the application range and means of punishments for dishonesty, institute a mechanism to classify and manage dishonest behaviors, and clarify the channels of legal relief for the punishments, preventing joint punishments from repeating penalties to information subjects.


Wang Xiaomei is an associate research fellow from the Institute of Law at the Chinese Academy of Social Sciences.

edited by CHEN MIRONG