Abacus | China’s credit ratings plan: from social media to medium of social control
Online histories will be trawled in a new system to decide the debt-worthiness of 1.4 billion Chinese. If you need a loan, it might be time to unfriend that human rights lawyer – and ‘like’ that Communist Party official
“Ratings,” former junk bond king Michael Milken likes to say, “are not credit”. Milken should know. In the 1980s, he made a multibillion US dollar fortune dealing in the debt of companies deemed by the credit rating agencies to be below investment grade. In effect, he was arbitraging the inbuilt inaccuracy of credit ratings.
China’s leaders would do well to heed Milken’s words as they move towards rolling out a “social credit rating” system intended to cover each and every one of the country’s entire 1.4 billion population.
The latest step towards this goal came last week, with internet giant Tencent’s nationwide launch of a new individual credit scoring system within its popular WeChat mobile app.
According to the company, the app aggregates data across five areas – trustworthiness, security, wealth, consumption and social networking – to allot users a personal score of between 300 and 850 points. Users with high scores then get to enjoy special “privileges”, such as cash loans, consumer credit and even deposit-free bicycle hire.
Tencent is one of eight companies licensed by Beijing to create individual credit rating databases based in part on people’s online behaviour and payment histories. Enthusiasts for the initiative say it will play an important role in the development of an advanced consumer economy in China, where until now ordinary people have been denied access to credit because of the lack of individual ratings.