China just announced a new social credit law. Here’s what it means.

The latter raises more questions. The Chinese government says there needs to be a higher level of trust in society in order to nurture it. Legal institutions and government agencies will be held accountable as well.

Things begin to get confused here. The government believes that building trust requires a one-size-fits-all solution and that the essence of all these problems is a lack of trust. Just as financial credit helps assess the creditworthiness of a person, it believes that social credit can help people assess the trustworthiness of a person in other aspects.

Social credit is often lumped together with financial credit in policy discussions even though it is a much more new field.

Local governments sometimes mix up these two. It is possible that a regulation will talk about how doing non-financial activities will hurt your credit. The province of Liaoning said in August that it was looking at ways to reward blood donation.

The country seems to want to keep the two separate, and the new law addresses them with two different sets of rules.

Has the government built a system that is actively regulating these two types of credit?

There was a plan to have a national system in place by 2020. The legal framework for the system was only released in the November 2022.

The government has figured out the finances. The Chinese equivalent of the American credit bureau system is the zhengxin system, which is maintained by the central bank. It records the financial history of more than one billion Chinese individuals and gives them credit scores.

Regulations on the social side have been ambiguous. The national government has only built a system for companies, not individuals, which gathers data from different government agencies. It's similar to the IRS, FBI, EPA, USDA, FDA, HHS, HUD, Department of Energy, Department of Education, and every courthouse, police station, and major. Any Chinese citizen can easily find the result on Credit China.