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Social Credit Systems

Credit scoring is a typical spin-off within debt economies. The price (interest and conditions) of debt is determined by the credibility of the debtor. A potential creditor is of course highly interested to assess the debtor’s credibility as realistic as possible. Credit rating agencies (specialized for corporations, consumers or sovereign states) collect data on debtors and use (mostly secret) algorithms for predicting their credibility with a quantified score.

Also in China, credit rating was initially used to guide financial activities of creditors in economic business life. Yet, the ‘social credit system’ built up by the Chinese government extends the scoring idea far beyond economic debt relations. The envisioned record system is aimed to track and evaluate general social trustworthiness of businesses, individuals and government institutions. Already today, different (still experimental) local social credit systems coordinate and control various areas of society.

Notwithstanding its enormous totalitarian potentials and threats, social credit also could act e.g. as a lever for environmental protection. In any event, social credit systems embody a fundamentally different conception of debt transcending the financial dimension and even establish a novel inter-systemic social medium or currency. In some experimental regions people could e.g. directly exchange credit points for social services or even goods.

We aim first at understanding the relation in between debt and social credit. Within Chinese consumer debt discharge, social credit scoring is e.g. used to control debtor behavior. Vice versa, ‘insolvency’ or ‘debt restructuring’ could also be a useful analogy within the social credit system itself, e.g. to enable heavily ‘under-scored’ people a fresh social start. Finally, we want to analyze the reflexive potential, dangers and possible safeguards (e.g. transparency provisions) of social credit systems. Within financial credit scoring parallel discussions could be found on transparency of scoring factors, algorithms and balancing weights (like in the 2023 ECJ Schufa-case, C 634/21).

Funded by the European Union (ERC, RESOLVENCY, 950427). Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Research Council Executive Agency. Neither the European Union nor the granting authority can be held responsible for them.