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Jakarta Post

China's Social Credit: New challenges and benefits

Jakarta   /   Tue, February 27, 2018   /   04:30 pm
China's Social Credit: New challenges and benefits China's Social Credit is a new approach system for the Chinese government to monitor, assess and manage the behavior of all individuals, companies and non-governmental organization in China. (Shutterstock/File)

China has great ambition to take advantage of big data in the government system with the aim of organizing all their people in all activities of people's lives, not only in the economic sector but also in political behavior. The great program is named China's Social Credit.

China's Social Credit is a new approach system for the Chinese government to monitor, assess and manage the behavior of all individuals, companies and non-governmental organization in China. This large project is a response to the collapse of confidence in the public institutions and the need to ensure the Chinese population remains on the right track according to the country's vision.

This assessment is based on monitoring every people’s social behaviors such as obedience paying off debt, social interactions, and spending habits. It will then be ranked to get a national ranking as the basis of the trustworthiness. Each entity will be assessed in a certain scoring method which will then be rewarded and punished.

For example, in Suzhou city, every person who donates blood will earn six points on the credit system. Each point will be used to obtain prizes such as discounts on public transport or a short waiting time while queuing in line at the hospital. Meanwhile, people with low scores will be classified in blacklists and get punishment like restricted access to travel out of the region.

The system has been carefully crafted with testing in several cities in China. The outline plans of this program are made in 2014. Then, the Chinese government has made guidelines to clarify the system by 2016. It will be implemented throughout the country at the latest by 2020.

However, the program appears to have a disguised purpose from the Chinese government. China's Social Credit is predicted as a new tool to monitor and regulate market behavior.

Mercator Institute for China Studies (Merics) accused that the program would legalize the principle of self-restriction of companies, which is the government's strict monitoring of the economic and non-economic behavior of the company through big data technology. That is, the government will influence the company to take policy or business decisions in line with the government's policy strategy.

Some companies that act and make policies that conflict with the vision of the Chinese government will be given a lower rating. It will make the company will get a penalty, such as unfavorable conditions to apply for new loans, higher taxes, no license to issue securities or listing on the stock exchange, and loss of opportunity to participate in government-funded projects.

The most important element of China's Social Credit program is the integration of all data. The data will make it easier to direct the economy of the country and make it easier to allocate resources more intelligently than the market price mechanism. In conclusion, a very fragmented and unfounded long-term liberal economic strategy will be difficult to compete with a directed Chinese economy.

In this case, Indonesia will be faced with two important issues. First, what is the impact of China's Social Credit on Indonesia? and what Indonesia's next plan to maximize the big data technology for the national interest? These two issues will be closely related to the development of our regulations.

It is clear that China's Social Credit implementation is also binding on foreign companies operating in China. In fact, China is one of Indonesia's strategic partners in trade relations. The Central Statistics Bureau (BPS) data shows that in January 2018, China occupies the first position as a major supplier of non-oil goods and the main export destination of Indonesia.

The existence of China's Social Credit system which must also be obeyed by foreign companies has serious consequences for Indonesian companies that have business relations with the China to make adjustments and learn the technical rules more deeply.

Complex problems will arise if Indonesian companies operating in China are required to report their internal business information to the Chinese government. Similarly, if a Chinese company operating in Indonesia is required to disclose its business data from Indonesia to the Chinese government then how Indonesia's law protects it. So, it allows for a legal conflict and it takes a lot of in depth-study to find a way out of the case.

We have to admit that China has created decades of effectiveness through the setup a top-down ruling system based on big data. So, their government has dubbed the digital totalitarian state. Indonesia should also be able to benefit from this big data revolution in the context of the prevailing democratic system. At least there should be a clear direction for the legal regime related big data not only able to protect the national interest, but should open the ease for the progress of the domestic business.

In addition, big data can provide guarantees for the creation of our government transparency and increase public participation in any government policy making. Quick steps are needed to immediately provide certainty for the business do not hesitate to participate in maximizing this great potential for the prosperity of our country.

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The writer is a graduate of Faculty of Law, Gadjah Mada University, Yogyakarta. He is interested in the legal, social, and economic aspects of big data, artificial intelligence and internet of things.

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