The dance of dualities in the Chinese Social Credit

Unlike the conflicting nature of dual forces in western philosophy, traditional Chinese philosophy manifests this duality in the form of complementary and balancing forces exemplified in the Yin-Yang.

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leadership

Nishant Dilip Sharma, Research Intern, Institute of Chinese Studies, Delhi

Dualities have always held a prominent place in traditional Chinese philosophy. Unlike the conflicting nature of dual forces in western philosophy, traditional Chinese philosophy manifests this duality in the form of complementary and balancing forces exemplified in the Yin-Yang. The way in which the Chinese government has gone about experimenting and implementing the infamous Social Credit System in China is another duality at play.

What is being seen as the emergence of an Orwellian “Big Brother” age in China, is being carried out in several cities through a number of pilot projects running on a dual ‘carrots & sticks’ model. Just like any other ‘reward-punishment’ scheme, this programme offers certain incentives (carrots) to people complying with the expectations of the governing body and at the same time, has punitive sanctions (sticks) in place for non-compliance. Interestingly, the quality of the carrots and the size of the sticks has not been uniform across all pilots.

This arises from the fact that the implementation of pilot programmes is being undertaken in a two-pronged approach. At one end are the Government run mandatory SCS programmes that are operational in more than 43 Chinese cities. At the other end, there are the corporate-run Social credit systems. Unlike the Government SCS programmes (GSCS), the corporate ones (CSCS) are not mandatory. The CSC pilots do offer virtual and monetary rewards to their customers, however the real intent is to eventually become incorporated with the government’s plans. This way the corporate in question remains in the forefront when SCS is rolled out in a more comprehensive measure. Speaking of the sticks, punishments are harsher in GSCS than under CSCS. The carrots and sticks in the GSCS are in the form of ‘red-lists’ and ‘black-lists’ respectively. While one’s name in the ‘red-list’ would mean a special honor and privileged/subsidized access to public services, a name in the ‘black-list’ would mean lesser privileges or denial of certain privileges. This could mean low internet speed, ban from traveling, denial of bank loans, public naming and shaming, etc. In short, one’s social credit scores could have a great impact on his/her routine life and social reputation.

In a country which bears the tag of the most populous nation on Earth, such measurement of reputation scores for each individual is no small undertaking. This is accomplished through the creation of a systematic surveillance state where big data and artificial intelligence play a major role. Each camera captures the movement of every face and small offenses like jaywalking or walking your dog without a leash could result in an immediate fine from the government. Thus, surveillance in the eastern industrialized towns is associated more with governance and has helped bring down law enforcement costs and many governance issues.

In contrast, state surveillance in Xinjiang and Tibet is employed to address security concerns. Surveillance cameras here snoop into the personal lives of the inhabitants to stamp out any cultural expression. Any sign of resistance opens up the gates of re-education camps, the insides of which many have seen but few have come out to tell the story. Here state security is a priority while separatism is viewed as evil and surveillance becomes a tool. This dual nature of surveillance, that of governance in the eastern region and that of security in the western region, is another duality present in the Chinese system. This duality, however, begs to question the coherence of what China plans to achieve with a full-scale rollout of the SCS model in the entire Mainland China, which could be up and running as early as 2021.

These dual objectives, dual implementation models, dual outcome conditioning, raise multiple questions: Will China be successful at creating a reputation state amidst the incongruities that exist in China? The answer seems to be hooked to a second question: Will China be willing to respect the socio-geographic disparity present between the historically separatist western regions and the presently thriving eastern industrial hubs?

One way of doing so would be to prevent any punitive sanctions and credit reductions on the grounds of cultural suppression. A conundrum in the eastern region could be credit rating reductions caused due to systemic failures, human errors, or corrupt bureaucracy. As remediation mechanisms, legislations are being put in place to prevent such reputation harms. Shanghai’s local credit legislation passed in 2017 on the “right to be forgotten” provides a much-needed right to credit restoration and a reasonable requirement on administrative agencies’ query over citizens’ social credit information.

Such remediation mechanisms are also extended to cover data protection and norms for safe collection, processing and storage of personal data. These measures are limited to eastern cities like Hubei, Shanghai, and Hangzhou. The lack of such legal remedies in the GSCS pilots being run in the western region calls for a systemic shift in the way the pilots are being conducted. More polarized developments in the way the pilots are conducted could likely leave the western inhabitants estranged and brew discontent if the policy is applied without systemic planning and West-specific trials. Perhaps it’s time for the policymakers to take a hint from their traditional philosophies and create more balancing dualities than conflicting ones.

CFIUS 2.0: An Instrument of American Economic Statecraft Targeting China

Uday Khanapurkar, Research Intern, Institute of Chinese Studies

Trade tensions notwithstanding, with the strengthening of the Committee on Foreign Investment in the United States (CFIUS)1, little doubt remains that contemporary Sino-American relations are characterised by an “admixture of the methods of commerce with the logic of conflict” (Luttwak, 1990, p.19). ‘CFIUS 2.0’ is slated to exhibit an unprecedented quantum of oversight and finesse in conducting American economic statecraft with its sights fixed largely on China.

With the American foreign policy focus, having pivoted from counter-terrorism to strategic competition with a rising China, the recent iteration of CFIUS reforms2 takes due stock of the USA’s changing priorities. Interestingly, nine out of the 11 takeover bids killed or abandoned at CFIUS’ suggestion under the Trump administration originated in China.

The renewed CFIUS process is now geared toward preventing Chinese appropriation, through equity investments, of American technologies that underpin American competitiveness or which the DoD considers sensitive to military superiority. With respect to critical technologies and infrastructure 3, CFIUS is now enabled to review investments by foreign persons irrespective of whether the stake obtained is controlling (upward of 50 per cent) or not. In doing so, FIRRMA aims to safeguard even Continue reading “CFIUS 2.0: An Instrument of American Economic Statecraft Targeting China”

China and Globalization: Time for New Beginnings?

He Fan, Professor of Economics, HSBC School of Business, Beijing, Director of Maritime Silk Road Research Center
Zhu He, Postdoctoral Scholar, Peking University & Assistant Director of Silk Road Research Center
Li Chaohui, Research Assistant, Haitian Silk Road Research Center, HSBC School of Business, Peking University

This article was originally published in the Business Standard as China’s version of globalisation’, 14 October 2017. This is part of a series by Chinese economists facilitated by the ICS. The original text in Chinese follows below the English version.

In the past 40 years, China has achieved sustained high rate of economic growth after the implementation of the policy of reforms and opening up. This has generated worldwide attention for the “Chinese miracle.” In 1980, China’s exports amounted to only 5.9% of GDP and its foreign investment abroad was only just over US$1.6 billion; by 2013, the latter figure had increased to US$290 billion.

China’s integration into the world economy essentially began in the 1990s. Continue reading “China and Globalization: Time for New Beginnings?”

Chinese Steel Industry’s Improving Performance and Implications for India

Aravind Yelery, PhD, Assistant Director, Institute of Chinese Studies

China recorded the highest global production of steel in 2016 despite its slowed growth rate. This suggests that steelmakers were focused on boosting output because they were eager to capture higher profit margins.

Steel production in China increased to 68,510 thousand tonnes in October 2016 from 68,170 thousand tonnes in September. Monthly production in China averaged 29,010.98 thousand tonnes from 1990 until 2016, reaching an all time high of 70,650 thousand tonnes in March 2016 with a record low of 4,918 thousand tonnes in February 1990. The rising trend in capacity continued from 2015 when China’s national steel output was 1.1235 billion tons, up by 0.6 percent over the previous year. Continue reading “Chinese Steel Industry’s Improving Performance and Implications for India”