OPEN SESAME

From shop­ping on­line to rent­ing bikes, Chi­nese ci­ti­zens are con­tribut­ing to the fab­ric of their own su­per­vi­sion

The World of Chinese - - Dragon's Di­gest - BY DAVID DAW­SON

On June 1, the PRC’S new in­ter­net safety law, re­quir­ing users of all in­ter­net ser­vices in the coun­try to reg­is­ter un­der their real name, took ef­fect with barely a pass­ing men­tion in the main­land me­dia. In­stead, the main story was about the open­ing of China’s first au­to­mated con­ve­nience store, Bin­gobox, in Shang­hai, and the sim­i­lar ven­tures that fol­lowed, nick­named “vi­ral en­ter­prises” by a rash of tech and com­merce pub­li­ca­tions.

Coin­ci­dence? It’s hard to say. Ei­ther way, the events of last sum­mer are a crash course in Chi­nese gov­er­nance in the dig­i­tal age. Laws, reg­u­la­tions, and a sur­veil­lance in­fra­struc­ture from above are deemed al­most ir­rel­e­vant, com­pared to the in­no­va­tions of pri­vate com­pa­nies, many of which have con­vinced con­sumers to hand over their per­sonal data will­ingly— even en­thu­si­as­ti­cally.

The Bin­gobox au­to­mated store, for in­stance, op­er­ates us­ing steps that are, by now, se­cond na­ture to most cell­phone users in China: Users scan a quick-re­sponse (QR) code and reg­is­ter with their gov­ern­ment-is­sued ID num­ber to open a Bin­gobox ter­mi­nal, and pay with Wechat or Ali­pay apps, both sys­tems that re­quire real name reg­is­tra­tion. Tao Café, the au­to­mated out­let of e-mar­ket­place Taobao, adds face-scan­ning, ex­pe­dit­ing the process by sim­ply charg­ing the shop­per’s Taobao or Ali­pay ac­count for items as they walk out.

A coun­try-sized ver­sion of Tao Café seems a likely di­rec­tion for the Chi­nese gov­ern­ment’s con­tro­ver­sial “so­cial credit” scheme, which aims to go into ef­fect by 2020. To me­dia in the West, the prospect of data­bases and “trust” scores as­signed to each Chi­nese cit­i­zen based on their so­ci­ety­wide data foot­print—in ar­eas like debt re­pay­ment, crim­i­nal record, job per­for­mance, and more—seems like sur­veil­lance.

It’s telling, how­ever, that in 2015, the Peo­ple’s Bank of China (PBOC) as­signed the task of run­ning pi­lots of China’s first na­tion­wide con­sumer credit-rat­ing sys­tem to eight pri­vate com­pa­nies—among them Ant Fi­nan­cial Ser­vices, which is owned by Al­ibaba.

Data gi­ant China Rapid Fi­nance, though not part of the PBOC pi­lot pro­gram, is another ma­jor player with ac­cess to data from ubiq­ui­tous so­cial-me­dia app Wechat and its Wechat Wal­let ser­vice. Ant Fi­nan­cial, which runs the bur­geon­ing Sesame Credit, has the Ali­pay app, re­spon­si­ble for a mas­sive chunk of China’s on­line pay­ments.

To ex­perts who study the nexus of data and so­ci­ety, this choice was un­sur­pris­ing. “Data that com­pa­nies col­lect used to be seen as the ‘ex­haust’ of the dig­i­tal age: whether it’s your per­sonal in­for­ma­tion that they ask for, or your ac­tiv­ity or even meta-data about your ac­tiv­ity,” says Peter Chow-white, founder of Si­mon Fraser Uni­ver­sity’s GENA Lab, a cen­ter for re­search on the so­cial and or­ga­ni­za­tion im­pact of data. “But for many com­pa­nies now this is their pri­mary pur­pose, ei­ther to use [the data] them­selves or sell

to third par­ties, or even share with the gov­ern­ment.”

Chi­nese tech en­tre­pre­neur Jack Ma had been more ex­plicit—in a 2015 talk, he called data “the most valu­able as­set” of his com­pany Al­ibaba, the de­vel­oper of Taobao and par­ent com­pany of Ant Fi­nan­cial Ser­vice. Ali­pay’s rat­ing sys­tem, Sesame Credit, is cur­rently China’s most wide­spread, with a va­ri­ety of high-pro­file part­ner­ships: A high credit score brings ben­e­fits like ex­pe­dited visas to Sin­ga­pore and Lux­em­bourg, as well as de­posit-free bike shar­ing, ho­tels stays, and, as of Oc­to­ber, apartment rentals from par­tic­i­pat­ing de­vel­op­ers in eight Chi­nese cities.

Ali­pay keeps its cal­cu­la­tion of credit scores a se­cret: It’s based on some com­bi­na­tion of the user’s credit his­tory, abil­ity to ful­fill con­tracts, the sub­mis­sion of per­sonal in­for­ma­tion, be­hav­ior and pref­er­ence in pur­chas­ing, and re­la­tion­ships with other users in their Ali­pay “friend” list. Gen­er­ally speak­ing, though, scores can be raised by fre­quent pur­chases with the app or just from mak­ing one’s in­for­ma­tion more com­plete—for ex­am­ple, by fill­ing out the “ed­u­ca­tion” and “work” fields of the pro­file page. Users have even re­ported that us­ing the app’s “real name pur­chase” ser­vices, such as book­ing ho­tels or buy­ing in­surance, have ben­e­fited their score more than a reg­u­lar Taobao spree.

At the time of writ­ing, there are no di­rect penal­ties for hav­ing a low Sesame Credit score, and sign­ing up is tech­ni­cally op­tional (though opt­ing out is com­pli­cated). Yet as com­merce and ser­vices in China be­come more tech­nol­ogy-driven, sim­ply get­ting left be­hind can be pun­ish­ment enough. In Oc­to­ber, a su­per­mar­ket in Yibin, Sichuan prov­ince, courted con­tro­versy by mak­ing a high Sesame Credit score a hir­ing re­quire­ment; Ali­pay has al­ready spon­sored one cam­pus ca­reer fair in Hangzhou in 2016, where re­cruiters looked at stu­dents’ scores, sup­pos­edly as part of a “les­son” on the im­por­tance of good credit.

A rash of new app-driven “shar­ing” ser­vices—from um­brel­las to power banks—as well as nov­elty ex­pe­ri­ences like au­to­mated stores, are now avail­able only to those who ei­ther bor­row on credit or reg­is­ter their name—or pay a de­posit with a mo­bile app, which cre­ates data on “be­hav­ior and pref­er­ence” re­gard­less. Then there’s sim­ply peer pres­sure: Ali­pay has a but­ton al­low­ing users to show off their scores on Weibo, and users of on­line dat­ing plat­form Baihe, can even make the score part of their pro­file. Ed­i­to­ri­als ad­vo­cate Sesame Credit as the “strength­en­ing of mid­dle class val­ues” or “civ­i­lized qual­i­ties, a sen­ti­ment also found in the gov­ern­ment’s view of so­cial credit, a fac­tor of “so­cial ad­vance­ment and civ­i­lized devel­op­ment.”

Glob­ally, ac­cord­ing to ChowWhite, in­ter­net cul­ture is see­ing a con­tra­dic­tion “where peo­ple are be­com­ing more aware than ever about their pri­vacy, and in­creas­ingly con­cerned about it, but we don’t be­have like we’re con­cerned.” Even Chi­nese web users, who have never en­joyed ro­bust le­gal pro­tec­tion for

CON­SUMERS ARE IN TOO DEEP TO OPT OUT OF THE DATA REV­O­LU­TION NOW

When Zhao, a col­lege stu­dent, was sued in civil court over a debt early this year, she saw her “Sesame Credit” rank­ing plum­met overnight. The court had shared a list of de­fen­dants with Sesame, who down­graded her to the low­est-pos­si­ble rat­ing and had la­beled her a “lao­lai”— ba­si­cally a dead­beat who doesn’t pay loans. Zhao feared for the con­se­quences upon grad­u­a­tion in July: “Will it in­flu­ence my job seek­ing neg­a­tively if these credit records can be checked on­line?” she asked Peo­ple. cn.

That may be the least of her wor­ries. Au­thor­i­ties plan to take the re­sults of sev­eral trial “credit” pro­grams be­ing run by dif­fer­ent pri­vate com­pa­nies, then de­cide how to in­te­grate and im­ple­ment them na­tion­wide by 2020. To avoid po­ten­tial con­flicts of in­ter­est, al­lay con­cerns over pri­vacy, and re­duce the pos­si­bil­ity that pri­vate busi­nesses could gain a car­tel-like grip on the coun­try’s fi­nances, the PBOC is now ex­pected to ei­ther merge the data into an ex­ter­nal third part­ner, or cre­ate an in­dus­try reg­u­la­tor to mon­i­tor all the schemes.

“Cash­less” pay­ment sys­tems have be­come in­cred­i­bly pop­u­lar in re­cent years—52 per­cent of Wechat users con­duct less than 20 per­cent of trans­ac­tions with cash, and con­sumers spent 5.5 tril­lion USD through Chi­nese mo­bile-pay­ment plat­forms, nearly 50 times more than US ci­ti­zens, ac­cord­ing to a 2016 Ten­cent Re­search In­sti­tute re­port. It is through these on­line pay­ment plat­forms that the seeds for a much more com­pre­hen­sive so­cial­credit rank­ing have been planted. By tak­ing data from these widely used on­line pay­ment ac­counts— and as­sess­ing the so­cial mo­bil­ity of in­di­vid­u­als’ pay­ment his­to­ries—pri­vate com­pa­nies al­ready have a leg-up in de­vel­op­ing these schemes.

But what kind of data are we talk­ing about?

Sesame Credit and China Rapid Fi­nance aim to pro­vide pro­files of the app users that can be used by third par­ties to as­sess the reli­a­bil­ity of prospec­tive bor­row­ers for loans.

These third par­ties at present are made up of a smat­ter­ing of clients who of­fer fi­nanc­ing un­der much less oner­ous re­quire­ments than ma­jor state-run banks. One player is the peer-to-peer (P2P) lend­ing in­dus­try, which is worth a po­ten­tial 60 bil­lion USD in China, but is rid­dled with Ponzi schemes and failed loans due to lack of reg­u­la­tions. Techn­ode re­ported that, at the close of 2016, there were 816 bil­lion RMB worth of out­stand­ing P2P loans on the col­lec­tive books.

The in­dus­try has been grow­ing at dizzy­ing speed, but has of­ten been in the head­lines for the spec­tac­u­lar col­lapses of its com­pa­nies, or ac­cu­sa­tions of loan shark­ing and vi­o­lence. Re­cent high-pro­file scan­dals in­volve “naked loans”—when cash­strapped, usu­ally fe­male uni­ver­sity stu­dents sub­mit nude pic­tures of them­selves as col­lat­eral for high-

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