China to build social credit system amid challenges

In a country racked by unsafe food and other scandals, experts in China hope a national social credit system will reduce losses caused by dishonesty and rule violations.

According to a report by the Economic Information Daily this week, China will release an outline for setting up a system to assess the credibility of individuals and organizations in four areas, including administrative affairs, commercial activities, social behaviors and the judicial system.

Drafting of the outline was led by the National Development and Reform Commission and the People's Bank of China.

The governments of Guangdong, Jiangsu and Guizhou provinces have already embarked on drafting their own guidelines.

"A thorough credit system is indispensable for a society to operate well," said Zhou Keda, a sociologist with the Guangxi Academy of Social Sciences.

He said dishonesty has been a social problem in China. As theoretical education is not enough for people to understand the importance of integrity, the country must carry out reform at the institutional level.

China has long been troubled by food safety scandals and credit card, medical and corporate fraud. The scandals have affected daily life as well as the nation's international image.

Official statistics released by the Ministry of Commerce said that direct and indirect economic losses of Chinese enterprises averaged 600 billion yuan (about 96 billion U.S. dollars) per year due to dishonest behaviors.

According to the Economic Information Daily report, the establishment of a national social credit system will consist of three phrases.

By the end of June, individuals and organizations will be coded based on identity card number or organization number.

China will build an integrated platform by 2017 to share credit information on financial status, social security payments, traffic violations, and other criteria.

"It could help establish an incentive and punitive mechanism to improve people's sense of integrity," Zhou said. "In this way, we will award honest people and punish the dishonest."

Zhang Zheng, director of the China Credit Research Center under Peking University, said consensus has been reached on key points of the social credit system, but challenges remain in several fields, such as information collection, safety and supervision.

His view was echoed by a manager surnamed Yang of a financial institution in southwest China's Guangxi Zhuang Autonomous Region.

"When collecting credit data, we must prevent powerful people from changing their poor credit records and those of their relatives to ensure the system is equal and just," he said.

Meanwhile, measures should be adopted to keep credit information safe. He added that access to information should be regulated to avoid chaos.

Another challenge Zhou mentioned is the supervision of institutions that manage credit records, such as banks, transportation and social security departments. Their behavior should also be included in the social credit system and subject to public oversight.

Zhang suggested establishing a social credit regulatory committee to lead the system-building efforts and map out detailed rules.

"The public should be engaged in the process of making rules," Zhou said. "It is easy to build a social credit system, but it takes more time to restore morality, improve the market economic system and promote equality."