Coming Soon in China: ‘Social Credit’ for Companies, Too

A key target of China’s coming “social credit” system, which among Westerners usually triggers visions of “1984”-style monitoring of people, is actually misbehaving businesses.
Corporate America needs to prepare.

About 80% of information on the main data-sharing platform relates to companies rather than individuals, according to China consulting firm Trivium. Scheduled for full rollout in 2020, the system could help level the playing field, if well-implemented. But social credit will make falling afoul of regulations far more costly, and could be used as a weapon in trade disputes.

Privacy has always been a narrower concept in China than the West. Chinese-speaking foreigners can expect taxi drivers to grill about their income, marital status and other matters that strangers in the West usually avoid. And private electronic communications aren’t really private from the government.

The flip side is that information doesn’t actually flow well through society. Censorship and a Party-centric court system make whistleblowing difficult and dangerous, creating plenty of opportunities for corporate and official malfeasance. Losers are often small or foreign companies without good official contacts to bend the rules for them.

Corporate social credit is meant, at least in part, to address this problem—without fundamental social changes, like freeing the press, that could endanger Communist Party rule. Compliance or noncompliance with important regulations will be assigned a value and fed into an algorithm to produce a company’s overall rating on, for example, environmental protection. This rating will be shared across agencies through a central database, to some extent publicly.

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