SHANGHAI -- When trying to buy a plane ticket in April for a business trip, an employee of a foreign company in Shenzhen was shocked to have the purchase denied due to the worker's presence on a government blacklist.
The employee, surnamed Zhong, discovered that a company run by the would-be traveler's father had defaulted on a debt -- and Zhong owned stock in the business.
The list of "discredited" debtors is set by China's courts, which mainly go after those who fall behind on paying settlements or court-ordered compensation. Zhong had misgivings about being on the list in the first place, as shareholders should have only limited liability for the debts of the business. Yet Zhong had no choice but to go before a court to settle the neglected 400,000 yuan ($58,800) debt.
China is creating an unprecedented surveillance society in the name of ensuring promises are kept and debts are repaid.
This effort began with a planning outline for a "social credit" system announced in 2014. The project picked up steam with a memorandum signed in 2016 by the Supreme People's Court and more than 40 public- and private-sector institutions, including the public security, land and transport ministries, the People's Bank of China and China Railway.
The memo's contents are striking in their severity.
The parties agree to share the information on the blacklist and impose an array of restrictions against those on it. Discredited debtors are restricted from buying highly liquid insurance products, taking executive positions at companies, traveling by air or high-speed rail, staying at luxury hotels or playing on golf courses, buying real estate, using tour services, enrolling their children in expensive private schools and leaving the country. They also may have documents such as passports and marriage and vehicle registrations reviewed.
Taking steps to prevent people from reneging on debt or defying court rulings is not itself a bad thing. But careful consideration is needed to ensure that these kinds of harsh penalties -- such as outright limiting debtors' freedom of movement or punishing their children -- fit the crime.
Yet Zhou Qiang, the top court's chief justice, cited these restrictions at the March meeting of the National People's Congress to demonstrate how well the system is working. He boasted that 6.28 million people have been barred from flying as well as 2.29 million blocked from travel by high-speed rail.
Harnessing big data
Beijing's reach is extending even to private databases. Around the time of the blacklist memo, the Supreme People's Court partnered with Sesame Credit, an Alibaba Group Holding unit that operates its own social credit system.
Alibaba has grown far beyond its e-commerce roots to insert itself into every corner of people's lives, including via the Alipay smartphone payment platform and even management of idle cash in customers' accounts. By granting the company access to the blacklist and letting it block debtors' access to services, the government can give the penalties even sharper teeth. Some Alipay customers even had their balances seized last year.
The arrangement raises the possibility that Alibaba could not only use the court's information to lock out users, but also send customer data to the government.
Sesame Credit assigns users a credit score between 350 and 950. Since those with strong scores enjoy benefits such as higher credit limits and better interest rates, many users hand over all sorts of information and pay through Alipay whenever they can. Easy access to this data would be a godsend for authorities.
The Chinese government also announced a data-sharing agreement with a wildly popular bike-sharing service in late April.
Keeping citizens in line
The deepest worry is that the social credit system appears to be going beyond the blacklist -- which is essentially a way to punish financial misconduct -- and becoming a way to monitor and control people's lives.
Beijing aims to have citizens' credit records "completely covered on a nationwide scale," according to the 2014 outline, along with establishing "personal credit records" for a wide swath of the population including civil servants, lawyers, accountants, executives, medical personnel, teachers, journalists and tour guides, as well as establishing "uniform social credit coding systems" for people, companies and other institutions.
Details of this agenda have yet to be decided, but the sheer size of China's population of over 1.3 billion no longer poses a constraint to these plans. The government conceivably could connect every piece of information in the vast sea of digital data to individual citizens and thereby keep track of them.
Shanghai already has announced plans for a system where even speeding tickets and other traffic offenses will dent credit scores. Currency authorities have said they will keep records of overseas transactions and withdrawals involving as little as 1,000 yuan.
"Social credit" may sound nice, but it means that the state draws the line between good and bad behavior and decides how to punish the latter. The Shandong Province city of Dezhou posts a record of discredited debtors online, complete with names, birthdates, addresses and photographs. It even provides a tip line for residents to call if they spot these people.
The 2014 outline aims to have the social credit system fully implemented by 2020. How long the government can limit the system to deterring financial wrongdoing remains to be seen.