China's Corporate Social Credit System: The Dawn of Surveillance State Capitalism?

Abstract

Chinese state capitalism may be transitioning toward a technology-assisted variant we call “surveillance state capitalism.” The mechanism driving this development is China’s corporate social credit system (CSCS) – a data-driven project to evaluate the “trustworthiness” of all business entities in the country. We provide the first empirical analysis of CSCS scores in Zhejiang Province, to date the only local government to publish the scores of locally registered firms. We find that while the CSCS is ostensibly a means of measuring legal compliance, politically connected firms receive higher scores. This result is driven by a “social responsibility” category in the scoring system that valorizes awards from the government and contributions to Chinese Communist Party sanctioned causes. Our analysis underscores the potential of the CSCS to nudge corporate fealty to party-state policy and provides an early window into the far-reaching potential implications of the CSCS.

Note:

Keywords: State Capitalism, Chinese Communist Party, Corporate Compliance, Regtech, Social Credit System

JEL Classification: K22, O21, P21