Beijing reins in the social credit system to prevent official abuse, avoid collateral damage

A technical translation and analysis of the latest readout from China's Cabinet meeting

The State Council, China’s Cabinet, held its weekly 常务会议 executive meeting on Thursday, Nov. 26. According to the official readout (in Chinese), the meeting centered on one subject that has been of huge interest to foreign media and the China watching community: 社会信用体系 the social credit system.

Numerous articles have been written about the social credit system in English and unfortunately, many of them are, to put it mildly, wildly inaccurate.

For starters, Chinese citizens don’t have an individual credit score assigned to them and monitored by Beijing. It is not close to the dystopian nightmare straight out of Black Mirror, or the cutting-edge, Big Brother apparatus portrayed in the West’s popular imagination, as The Wired pointed out in How the West Got China's Social Credit System Wrong in July 2019.

Personally, I’ve compared the social credit system to the mechanism governing personal bankruptcy in the West, and China’s lists - the often-so-called blacklist - of individuals or businesses breaching credit to the UK's Individual Insolvency Register, in a brief Twitter thread.

More detailed work has been done by Jeremy Daum of the Yale China Law Center, who co-founded China Law Translate, known as @ChinaLawTransl8 on Twitter. The most recent compilation, I believe, of his articles on the social credit system was published two years ago in October 2018, and there have since been some more accurate articles, but his is still worth a read.

This writing is not intended to paint a broad picture, but to focus on the signals from the State Council executive meeting regarding the social credit system. In the following paragraphs, I’ll give a point-by-point translation of the latest readout, plus some NOTES that I wish to be old-school Pekingnology. The part of the readout that’s unrelated to the social credit system has been omitted.

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会议指出，党中央、国务院高度重视社会信用体系建设，这是发展社会主义市场经济的重要基础。为加强诚信建设、营造公平诚信的市场环境和社会环境，会议决定，坚持依法合规、保护权益、审慎适度、清单管理，规范和完善失信约束制度，有序健康推进社会信用体系建设。

The meeting noted that the Party Central Committee and the State Council attach great importance to the construction of the social credit system, which is an important foundation for the development of the socialist market economy. In order to strengthen the building of 诚信integrity/trust, to create a fair and honest market environment and social environment, the meeting decided the construction of social credit system must adhere to the following principles - compliance with laws and regulations, protection of rights and interests, staying prudent and appropriate, the approach of using a list, standardize and improve the system of restrictions upon breach of credit - so as to promote the orderly and healthy construction of social credit system.

NOTES:

The first sentence lays out Beijing’s self-professed purpose of the social credit system - it’s for the development of the socialist market economy, not something else, which is starkly different from the common Western perception that the system is primarily aimed at putting new shackles around people’s necks.

A perhaps overly simplistic example that I often give is that in the past many of Chinese courts’ verdicts on civil matters - money, that is - simply couldn’t get enforced. The losing party to a civil lawsuit just doesn’t pay. So the social credit system, in my opinion mainly about name, shame and then tame by restricting their non-essential or luxurious activities, is invented to enforce the verdicts. The use of the system then gradually expanded to other legal or administrative obligations.

The principles in this paragraph, such as protection of rights and interests, staying prudent and appropriate, the approach of using a list, standardize and improve the system of restrictions upon breach of credit, could be read that the State Council apparently believes they needed to be reaffirmed and highlighted, which then could be read that the social credit system up until the meeting had, at least, sometimes failed to live up to those principles, meaning there had been insufficient protection of rights and interests, not always staying prudent and appropriate, etc.

一是科学界定信用信息纳入范围和程序。将特定行为纳入公共信用信息，必须严格以法律、法规等为依据，并实行目录管理，向社会公开。行政机关认定失信行为必须以具有法律效力的文书为依据。

First, scientifically define the scope and procedure for incorporating (what kind of) credit information (into the social credit system). The inclusion of specific behaviors into public credit information must be based strictly on 法律 Laws and 法规 Regulations, and must be implemented within a certain list, and must be made available to the public. The Administrative Authorities must determine the breach of credit on the basis of legally binding documents.

NOTES:

It could be read that the current scope and procedure for incorporating (what kind of) credit information (into the social credit system) had NOT been scientifically defined enough - they could be too broad or arbitrary.

The inclusion of specific behaviors from now on can only be based on two sorts of rules: Laws and Regulations. In Chinese legal jargons, laws are those passed by the National People’s Congress and its Standing Committee, while 法规, which I translated as Regulations, refer to two categories: 行政法规 Administrative Regulations, which can only be adopted by the State Council, and 地方性法规 Regional Regulations, which have two categories:

1) The 地方性法规 Regional Regulations adopted by NPCs and their Standing Committees at the Province/Municipality/Autonomous Region level.

2) According to a rule change in 2015, the NPCs and their Standing Committees of Cities and Autonomous Prefecture which have 区 Districts within them, could also make 地方性法规 Regional Regulations, but these Regional Regulations could only become effective after they have been cleared by the NPCs their Standing Committees at the Province/Municipality/Autonomous Region levels, so this sort of 地方性法规 Regional Regulations should also count. (Full disclosure: this writer failed the National Bar Exam by 5 points - 355 short of 360 - in 2016 or 2017.)

What rules are excluded as a result of this? In my reading, the rules made by the central government ministries, may not count anymore, because their rules are known as 部门规章, part of 规章, rules set by the Administrative branch of the various levels of the Chinese government. Also losing out is 地方规章 (also part of 规章), rules set by the Administrative government of provinces, municipalities, or autonomous regions.

I might have lost you by now, but the point is the State Council now raises the bar for lower-level authorities in deciding which behavior - failing a public contract, bad quality of a public construction building, etc. - can be counted as credit information for the sake of the social credit system.

And to put specific behavior of a company or individual as breaching credit, now 具有法律效力的文书 a legally binding document must be cited, so subjective or arbitrary decision based on something else - local cadres’ 批示 written instructions, some sort of government red-letter document (not all of them are considered legally binding in Chinese law) - won’t count.

The State Council also mandates public disclosure here, which could ensure greater transparency.

二是规范信用信息共享公开范围和程序。信用信息是否及在何种范围共享和公开要坚持合法、必要原则，并在编制信用信息目录时一并明确。

Second, standardize the scope and procedure of credit information sharing and disclosure. Whether and in what scope credit information is shared and made public must adhere to the principle of lawfulness and necessity, and be made clear in the preparation of the credit information list. 

NOTES:

One of the best things to deter abuse is to establish clear protocols, the absence of which breeds arbitrary and subjective interference. And that’s what’s intended here.

Also, note the principle of necessity. For example, if a business fails to pay its water bills in time, should that be included as part of the credit information based on which credit-breaching could be decided? Or its taxes, court fees, social security payments for employees? That, in my reading, is what necessity could refer to here: not all information should be included in the credit information, only those necessary.

Again, it is about raising the bar.

三是规范严重失信主体名单认定标准，按照有关规定严格限定为严重危害群众身体健康和生命安全、严重破坏市场公平竞争秩序和社会正常秩序等方面的责任主体，不得擅自增加或扩展。具体认定要严格履行程序。

Third, standardize the criteria for identifying the list of subjects that seriously breached credit, in accordance with relevant provisions. The criteria (for identifying serious breaches) are restricted to such categories as causing serious harm to the public health and human safety, seriously undermining the order of fair market competition and normal social order, etc. The criteria shall not be increased or expanded arbitrarily. The specific identification (of subjects that seriously breached credit) must strictly follow procedures. 

NOTES:

The list of subjects that seriously breached credit is the list that will bring the worst consequences for businesses and individuals who breached credit, so this list theoretically should be handled most prudently to minimize inappropriate harm. So here the State Council sets specific criteria and mandates that new names must NOT be added to the list arbitrarily or easily, and protocols must be strictly followed.

四是依法依规开展失信惩戒，确保过惩相当。对失信主体采取减损权益或增加义务的惩戒措施，必须基于失信事实、于法于规有据，做到轻重适度，不得随意增设或加重惩戒，不得强制要求金融机构、信用服务机构、行业协会商会、新闻媒体等惩戒失信主体。

Fourth, punishment for breach of credit must be carried out according to laws and regulations, ensuring that punishment is commensurate with the breach. The disciplinary measures to be taken against the subject, by reducing rights and interests, or increasing obligations, must be based on the fact of the breach, in accordance with laws and regulations, be appropriate in its strength, and must not be arbitrarily upgraded or aggravated. It’s forbidden to mandate financial institutions, credit service agencies, trade associations and chambers of commerce, the news media, etc., to discipline subjects that breached credit.

NOTES:

Please note I did not capitalize laws and regulations, as I’m unable to ascertain if the Chinese wording 依法依规 here refers specifically to Laws 法律 and Regulations 法规 discussed above in. The regulations here could also be an abstract of all sorts of rules, or could not.

But the overall spirit is that punishment is commensurate with the breach. Translate: the punishment must NOT be excessively harsh. As ambiguous as the word appropriate sounds here, these quoted sentences at least send a clear signal.

Also, the working mechanism of the social credit system in the future must not mandate financial institutions (e.g. to stop giving loans) or news media (e.g. to report and shame) to do its bidding, which in effect also means: NOT excessively harsh.

五是建立有利于自我纠错的信用修复机制。除法律法规等另有规定外，失信主体按要求纠正失信行为、消除不良影响的均可申请信用修复。对符合修复条件的，相关部门和单位要按规定及时移出失信名单。

Fifth, establish credit repairment mechanisms that are conducive to self-correction. Unless otherwise provided by Laws and Regulations, the subject that breached credit can apply for repairment if they corrected the breach and eliminated the adverse effects based on relevant requirements. For those who meet the conditions for repairment, the relevant (govt) departments and units should remove them from the list in a timely manner, in accordance with relevant regulations. 

NOTES:

This is easy to unpack: establish an exit mechanism. Give the credit breachers a second chance, as long as they worked to restore their credit, e.g. enforcing a previously-unenforced court verdict by actually paying, and also in a timely manner.

六是加强信息安全和隐私保护。严格信用信息查询使用权限和程序，严肃查处泄露、篡改、毁损、窃取信用信息或利用信用信息谋私，严厉打击非法收集、买卖信用信息违法行为。

Sixth, strengthen information security and privacy protection. Be strict with the authorization and procedures of inquiring and using credit information. Seriously investigate and deal with the leaking, tampering, destruction, theft, and appropriation (for illegal personal purposes) of credit information. Crack down on illegal collection and sale of credit information violations. 

NOTES:

One of the biggest worries of any centralized information set, or data, is it could get leaked and thus breach privacy. One imaginative scenario, from me, could be: two companies are bidding for a public tender; one of them in the past perhaps failed to fulfill a certain legal obligation and that was recorded in the credit information, but it later corrected its mistake and restored its standing in social credit. But that piece of information could be leaked and exploited to its peril by its competitor in the bidding process. Here the State Council intends to stop things like this from happening.

会议要求，各地各有关部门要抓紧清理已出台的失信行为认定、记录、公开、惩戒等措施，不符合要求的要及时规范。

The meeting required that all relevant departments of local authorities pay close attention to, in a timely fashion, cleaning up the measures that had been introduced to identify, record, publicize and punish breaches of credit, and those that do not meet the requirements (above) must be standardized in a timely fashion.

NOTES:

Basically a call for self-correction to lower-level authorities: do what the State Council says above.

Now that wraps up the readout from Thursday, Nov. 26 State Council meeting, but I also want to highlight some background that Xinhua (for those of you who just stumbled here, full disclosure: the employer of my day job, but NOT writing my tweets or this newsletter Pekingnology) included in reporting the readout:

分析人士指出，近年来，我国在扎实推进社会信用体系建设方面进行了一系列有力有效的探索实践，但总体仍处于起步探索阶段，存在个别地方、个别领域信用信息记录、失信名单认定、失信联合惩戒范围随意扩大、泛化倾向，以及信用修复较难、权益保护不到位等问题，对企业和个人合法权益造成影响。这六方面举措针对当前社会各界反映比较集中的问题，提出相应解决措施，有利于推动社会信用体系建设规范有序进行。

Analysts said that, in recent years, China has carried out a series of effective explorations in the construction of social credit system; overall, it’s still in the initial, explorational stage; there exist problems, at individual places and individual areas, where there is a tendency to arbitrarily expand the recording of credit information, the identifying of lists of credit breachers, and the joint disciplinary actions. There are also problems arising from difficulties in repairing credit and insufficient protection of rights and interests. These problems affected the legitimate rights and interests of companies and individuals. These six measures address the current problems that are among the most concerning to people from many walks of life and propose corresponding solutions, which are conducive to the standardized and orderly construction of the social credit system.

To sum it up, the new directives from the State Council aims to raise the bar of applying restrictions under the social credit system and slash the severity of such restrictions.

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