China's nightmarish "citizen scores" system uses your online activity, purchases, messages, and social graph to rate your creditworthiness and entitlement to services. One way your score can be plunged into negative territory is for a judge to declare you to be a bad person (mostly this happens to people said to have refused to pay their debts, but it's also used to punish people who lie to courts, hide their assets, and commit other offenses).
More than 6.7 million people in China have been placed on a blacklist created in this manner. Once you're on the blacklist, you are not allowed to buy high-speed rail tickets or plane tickets — and other people can see your ratings, and face social pressure to exclude you (their own scores are based in part on whether they associate with low-scoring individuals).
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In addition to not paying debts on time, one can also be blacklisted for lying in court, hiding one's assets and a host of other crimes. The Supreme Court said on Tuesday it was working on adding new forms of penalties.
China's courts have said a social credit system is needed to rein in the country's hangover of bad debt — both personal and corporate — because the lack of a personal bankruptcy law and a comprehensive financial credit system has limited the government's capacity to enforce financial penalties.
Fintech companies have explored using big data collected on everything from a person's internet browsing activity to online purchases to determine creditworthiness.
"The need for this comes from not having perfect institutions — there are plenty of ways to evade paying debts, so the cost of crime is low," said Wang Zhicheng, a professor specialising in credit risk at Peking University.
China penalty of the day
[Tyler Cowen/Marginal Revolution]
China penalises 6.7m debtors with travel ban
[Yuan Yang/Financial Times]