When browsing the internet in China, be sure to avoid logging on between 2am and 4am, steer clear of websites offering quick loans and beware of changing your mobile phone handset too often. A good rule of thumb is to order curtains for your office, and when shopping online, choose scuba gear over photographic equipment.
The reason? All of these choices may be affecting your credit rating. And your credit rating, as determined by a number of experimental algorithms being tested by China’s largest internet companies, may one day affect a lot more than your ability to get a loan — some believe it could determine your access to health, education, employment and status as a “good” citizen.
The new rating systems are part of a government-backed effort to increase lending to hundreds of millions of Chinese who want access to small business loans or consumer credit, but have no collateral or financial history.
To address this, companies offering everything from business loans to credit with retail stores are relying on “non-traditional” indicators such as internet search histories and mobile phone purchases to help determine who is creditworthy. Private corporations admit they can access the records of Chinese internet users thanks to licences issued by the central bank last year to develop experimental credit ratings.
These credit scores are becoming the gateway not just to loans, but to an increasingly wide range of non-financial activity. A higher rating can give you access to the fast lane in airport security, swifter approval of foreign visas or even help in adopting a pet.
A separate initiative by Beijing intends to use algorithms on all this data to rate not just citizens’ creditworthiness, but their overall “honesty” and “trustworthiness”, by as early as 2020.
So far, the government’s efforts are largely theoretical. No one knows exactly what the new models will look like or what variables will be employed. An opaque draft of the plan says the intention is to “use encouragement to keep trust and constraints against breaking trust as incentive mechanisms,” and spells out the objective to raise “the honest mentality and credit levels of the entire society”.
Wang Zhicheng, a professor specialising in credit risk at Peking University’s Guanghua School of Management, says the project is borne out of a “crisis in ethics” in today’s China. “People don’t think that credit or integrity is important,” he says. “That is what the [broader state] system is intended to do — raise the cost of unethical behaviour.”