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The Evil Genius of Sesame Credit

This is evil, and this is brilliant. China has introduced a system allowing people to manage their credit rating. But there’s a catch — lots of them [1]:

In the West, our credit score is simple. It’s our ability to pay. It’s measured from our assets, our income, and if we have bought on credit in the past and managed it well. That’s it. In China, the situation is… more nuanced. It’s not just that you have bought things, it’s also what you buy that contribute to your credit score, in either direction. If you’re buying things that the regime appreciates, like dishwashers and baby supplies, your credit score increases. If you’re buying videogames, your score takes a negative hit.

In theory, Sesame Credit (and its benefits) is optional. So far. For the time being. But China has already announced that it, or something very like it, will become mandatory from 2020. It has also announced that while there are benefits today for obedient people, it intends to add various sanctions for people who don’t behave, like limited Internet connectivity. Such people will also be barred from serving in certain high-status and influential positions, like government official, reporter, CEO, statistician, and similar.

Things that will make your score deteriorate include posting political opinions without prior permission, talking about or describing a different history than the official one, or even publishing accurate up-to-date news from the Shanghai stock market collapse (which was and is embarrassing to the Chinese regime).

But the kicker is that if any of your friends do this — publish opinions without prior permission, or report accurate but embarrassing news — your score will also deteriorate. And this will have a direct impact on your quality of life.

This is pretty close to a perfect totalitarian system. If you don’t conform to the state’s ideology, people will have to shun you or they will be economically ruined. The state doesn’t have to do anything; every member of the community becomes a secret policeman by default.

Could you imagine such a system coming to the US? If so, how?

58 Comments (Open | Close)

58 Comments To "The Evil Genius of Sesame Credit"

#1 Comment By Lewis Grant On October 13, 2015 @ 10:58 am

In some ways, it’s already here. If you manage your money prudently and take on minimal debt, you will have a mediocre credit score. If you take on tons of debt but always pay it off, you will have a good credit score.

In other words, if you take on little debt and thus little interest, you will have a mediocre score. If you accrue great amounts of interest and pay it in a timely fashion, you will have a great credit score.

The credit rating agencies do not measure prudent money management. They measure how much money you make for them.

The problem is that paying interest does nothing for the economy. It only further entrenches the rule of finance capitalism. It’s one big casino.

#2 Comment By grumpy realist On October 13, 2015 @ 11:37 am

Reading the New Scientist article, it does look like China is coming up with something a bit more than just a credit score that depends on other activity (although not social media, it seems.)

Also as pointed out, the more important this number becomes, the more people are going to come up with mechanisms to rig the number. And even though I’m sure there are members of the Communist Party who would love to be able to label every citizen with their “index of dissent” and pop everyone who falls under a certain level into prison, anyone who has even a remote knowledge of Chinese history will realize revolutions can happen in China when people get fed up…

It’s the Chinese mandarin attempt to keep control via data tracking over a Wild-west brawling, finagling, corrupt free-market-with-all-the-brakes-off society and it’s going to work about as well as such attempts usually do–not so much.

P.S. If you want to put the kibosh on attempts in the US towards similar activity, write your senators to support Elizabeth Warren’s bill, pay off all your credit cards (and don’t use them), and get rid of your Facebook account.

#3 Comment By Eliot Clingman On October 13, 2015 @ 5:22 pm

The movie comedy “Brazil” predicted Credit Ratings as a form of totalitarian control. See this clip: [2]

“Confess…QUICKLY. If you hold out too long you could jeopardize your credit rating…”

#4 Comment By MH – Secular Misanthropist On October 13, 2015 @ 6:04 pm

Sources of credit vary more than people think. Loans and credit cards are a form of credits, but so are your utility and phone bills. So even if you avoid car loans and credit cards (as I do), you’ll build up a credit rating on those bills. This is one reason why missing a utility bill can cause your credit card interest rates to go up.

What will happen is the credit rating agencies knock some points off for lack of variety in credit sources, but it won’t be enough to give you a bad rating.

With regards to Facebook and Twitter. I have never heard them used in making hiring decisions.

#5 Comment By Illierati On October 14, 2015 @ 6:45 am

I work in online consumer finance with big part of my job designing credit scorecards. Obviously our whole aim in using credit data to lend to the right people,we can look at a lot of data including at a very granular level. Even in the west we usually design our scores taking the major data from the credit bureaus.
If Chinese government banks decide to use ridiculous data to make lending decisions all i can say is that i see an opportunity lending to the gamers and friends of dissidents who are otherwise good risks. China is capitalist enough for openings like that not to be around for long. Its all about making money after all.

#6 Comment By EngineerScotty On October 14, 2015 @ 11:48 am

Sources of credit vary more than people think. Loans and credit cards are a form of credits, but so are your utility and phone bills. So even if you avoid car loans and credit cards (as I do), you’ll build up a credit rating on those bills. This is one reason why missing a utility bill can cause your credit card interest rates to go up.

What will happen is the credit rating agencies knock some points off for lack of variety in credit sources, but it won’t be enough to give you a bad rating.

OTOH, a lack of history of managing credit in smaller amounts (a VISA card or a department store charge card–younger readers should google “department store” for an interesting bit of US retail history :P), can make it harder to get credit in larger amounts on favorable terms, or at all: an auto loan, or a mortgage.

I’m firmly of the belief that one’s credit score should a) only be determined by factors that directly determine creditworthiness–i.e. one’s bill payment history; and b) should only be used in making lending decisions. Oh, and c) should not be influenced by the behavior of one’s friends and associates.

It’s the latter part of this that disturbs me the most of the China proposal, even though it’s long been the case that informal measures of social caste or conformity to the dominant social paradigm (church membership, correct ethnic group, educational pedigree, country club membership, postal address, amount of hair on one’s head/face/body, clothing style) have long been used to discriminate against people in all sorts of commercial and political contexts, even though many of these things have nothing to do with the task at hand. While Facebook and such may be new technology, and religious conservatives may not have experience with being an out-group, there isn’t that much new under the sun here.

#7 Comment By JonF On October 14, 2015 @ 1:15 pm

Re: Loans and credit cards are a form of credits, but so are your utility and phone bills. So even if you avoid car loans and credit cards (as I do), you’ll build up a credit rating on those bills.

Yes, and no. Delinquencies are likely to be reported, on-time payments generally not. So you can pay your electric bill faithfully every month and it won’t do a thing to improve your credit score– or establish one for you, if you otherwise lack one.

#8 Comment By JonF On October 14, 2015 @ 1:27 pm

Re: If you accrue great amounts of interest and pay it in a timely fashion, you will have a great credit score.

It’s not the interest, but the debt. If you pay your credit card off monthly, before any interest accrues, you will be be reported, by the banks, as “pays on time” and hence will reap the benefit of that. And at age 19 when my new car (bought with my father as cosigner) was totaled after a bare five weeks and paid off by insurance, my credit score when from zero to champion almost instantly.