By Godfree Roberts from his newsletter
This week’s selection from Godfree’s excellent China newsbrief includes the status of Dollar trade, Huawei, Technology and the much maligned (in the West) Social Credit system.
Economy and Finance
After years of talking about abandoning the US dollar, Russia and China are doing it for real. In the first quarter of 2020, the share of the dollar in trade between the countries fell below 50 percent for the first time. Four years ago the greenback accounted for over 90 percent of their currency settlements.[MORE]
The PBOC says China should switch from SWIFT to a domestic financial network and consider dropping the greenback as the anchor currency for its foreign exchange controls. It also recommended developing legislation similar to the European Union’s Blocking Statute, which allowed the EU to sustain trade and economic relations with Iran despite US sanctions.[MORE]
Science and Tech
The annual ranking of articles published in peer-reviewed science journals worldwide is now available from Scimago. Frans Vandenbosch kindly distilled it into the chart you see below. Chinese scientists are widening their lead over US scientists every year, as we would expect, since the PRC invests four times more money in R&D than the US.[MORE]
Globally, 137 countries have already signed cooperation agreements with BeiDou satellite navigation systems.
After a month in orbit, BeiDou’s last satellite passed its final test by locating a plane in flight while the tracking and monitoring an air terminal. By the end of 2023, all civil aviation aircraft will have BeiDou-based positioning and tracking capabilities. Myanmar’s Ministry of Fisheries has purchased 1,000 BeiDou shipboard terminals for vessel position information and tracking and 137 countries have signed cooperation agreements with BeiDou.100% of BeiDou’s core components are made in China.[MORE]
The fight against Huawei and the ‘kidnapping’ of its CFO
(Editorial comment – also refer to Kidnapping as a tool of imperial statecraft? by The Saker as well as the US clear theft of TikTok to give it as a gift to Microsoft. Kidnapping, businessnapping and theft are the favorite tools of empire now.)
The Truth About Social Credit – a different way to create social cohesion and harmonization of a very large society
The most authoritive Government release on Social Credit in some time is available for public comment through August 20th., and seeks to clarify critical concepts and concerns in building China’s Social Credit System such as
- What data can be collected or used as ‘Credit Information’？
- When information can be shared or made public and how？
- What penalties are allowed, and what procedures are to be used?
- How negative ‘credit’ can be restored?
The overall goal is to make sure that the system is part of the legal system, not something beyond it or parallel to it.
If you aren’t living in or studying China, you may well believe that the Social Credit System is an algorithmic reputation scoring mechanism based on “real-time monitoring through big data tools” to generate a score “controlling virtually every facet of human life” that “dictates one’s place in society“. The reality is both more complicated and far less exciting.
People would likely have a more accurate understanding of the system if China had said they were crafting a “Law on the Collection and Use of Administrative and Regulatory Data” instead of a ‘social credit system’. The ‘social credit’ name isn’t only evocative in English but also reflects the misguided attempt to include diverse topics such as financial credit reporting, administrative regulation, and public morality propaganda under the same project name, even though these pieces remained fairly discrete in practice.
It’s probably safe to say that the primary function of ‘social credit’ is one of administrative regulation, operating through industry-specific blacklists. Regulatory agencies were all tasked with generating rules for what violations of the laws under their authority would justify blacklisting. Blacklisting is important, not only because it creates a negative public record, but also because various agencies have signed inter-agency MOUs to take limited enforcement action against those blacklisted by another agency. Blacklisting by the food and drug administration, then, might result in consequences when applying for permits from an unrelated agency. This tool lets you explore the full range of cross-departmental punishments under this system.
Updating the Blacklists.
The new draft rules revisit the drafting of industry blacklisting standards and procedures to require both a serious violation of law AND:
- A threat to health or safety,
- disruption of the marketplace,
- violations of judicial or administrative orders, OR
- refusals to perform national defense duties.
The third category is about increasing the enforceability of court judgments and refers to the court system’s blacklist for ‘judgment defaulters’- those who have an active judgment against them and the ability to satisfy that judgment, but who refuse to do so. This one blacklist is overwhelmingly driving most of the exotic penalties connected with social credit, such as the no fly list and limits on spending. Interestingly, it is described as necessary to increase the ‘credibility’ of the courts.
The new draft rules also require that industry blacklisting standards now include express mechanisms for being removed from the list or correcting information. More importantly, the standards must be released for a period of at least 30 days for public commenting before they are enacted, and their implementation must be periodically evaluated by a third party after enactment.
Before being blacklisted, parties must be given notice of the reason and the legal basis and have a chance to object. If blacklisted, they must be given a clear written decision indicating the reasons, rules for removal, and so forth. Blacklisting decisions should generally not be made below the county-level and are reviewed at the provincial level.
All credit punishments must be listed in a national catalog of penalties drafted in conjunction with experts and other concerned parties. The draft rules make clear that punishments methods cannot require 3rd parties like banks and businesses to take action against blacklistees.
An explicit legal basis must be provided for all possible punishments.
This has actually been done in the past for inter-agency punishments authorized in cross-departmental MOUs mentioned above, although some have found that the scope of the cited authority may have been exceeded. Generally, however, the need for a legal basis has already limited cross-departmental action to areas where an agency has discretion to consider a broad range of factors- such as in permitting and licensing, with punishments generally been limited to：
- Higher scrutiny or restrictions in authorizing necessary permits, credentials, or approvals,
- Higher scrutiny or restrictions on participation in government contract bidding or authorization of use of government resources,
- Restrictions on receiving/ revocation of awards and honors.
- Increased routine regulatory oversight
- limits on receiving government benefits.
One of the greatest fears about the social credit system is that the ‘credit consequences’ for a violation could become a way of covertly increasing the violations’ statutory penalty. Meaning that since ‘untrustworthy conduct’ refers to violations of laws and legal obligations, there shouldn’t be any collateral consequences that increase the punishment beyond what the relevant law authorizes. A parallel might be the lasting impact of a criminal record long after a sentence has been served.
The new rules are at pains to say that this can’t be tolerated. There must be a legal basis for penalties and that if the law doesn’t allow for sufficient penalties, the correct approach is to lobby to amend the law, not use social credit, not only requiring a legal basis for penalties but also adding that if the law doesn’t allow for sufficient penalties, the correct approach is to lobby to amend the law, not use social credit.
A global concern today is the collection of personal information and the new rules attempt to regulate what information should be collected and used as ‘credit information’. The inclusion of ‘Public Credit Information’-the information collected or generated by government agencies in the course of their duties- in social credit is to be limited to the types of information in a national uniform catalog created by the inter-agency committee for establishing social credit with the input of legal experts, scholars, affected businesses, industry associations, and others. Local public credit information catalogs have been available for some time, but a national catalog will limit local discretion and help standardize the system.
The purpose of collecting or using information is also required to be indicated- and consent must be given for the collection of information that isn’t authorized by law. To try and ensure that consent is voluntarily given, the rules say that it must not be coerced or gamed through methods like demanding blanket consent. This follows recent moves on privacy in the commercial sector.
If something is to be considered negative credit information- it must be based on judicial rulings, arbitration documents, administrative decisions and rulings, or other effective legal documents. Again, social credit is concerned with recording and publicizing violations of laws and legal obligations.
The draft rules are open for public comment until August. As written, they would require that industry blacklist and social credit rules comply with them by the end of 2021 or be invalidated. Much of what they say is positive, but not groundbreaking in that they largely restate principles that were always in place or were emerging in practice over the past several years. Moreover, the draft, like much national level authority is quite vague, leaving room for future problems. The required national catalog of public credit information or punishment lists, for example, are yet to be seen, nor are specific mechanisms and procedures for credit restoration and corrections. The requirements that all standards and rules for punishments be made public may ultimately be among the most concrete improvements- allowing monitoring and analysis of the systems’ evolution.
Most critically, the main purpose of the draft is to harmonize social credit with China’s existing legal system, and while ‘legality’ should be a minimum requirement, it is no panacea. Many laws creating obligations or prohibiting conduct in China are unclear or easily abused. Others, that criminalize speech such as mockery of the national anthem are simply unjust. Limiting social credit to the enforcement of such laws, can’t improve those underlying laws.