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Acton Commentary

China exports its ‘social credit’ system to Venezuela

The death of Mao Zedong 43 years ago freed the Chinese people from his idiosyncratic brand of repression. The dramatic entry of the People’s Republic of China into the international economic system transformed China, lifted hundreds of millions of people out of poverty, and created a new world power.

Contrary to the hopes of many advocates of engagement, economic integration did not bring political liberalization, though the PRC’s control became less than absolute. Carefully calibrated dissent could be expressed on policy, though one could not challenge the Chinese Communist Party’s control. Contacts with the West burgeoned. 

Then came Xi Jinping. The time he spent in America as a student seemed to fill him more with fear than respect. Since becoming president in 2013, he has consolidated his personal power and strengthened the CCP’s control. In effect, he has revived Maoism and totalitarianism, attempting to crush any hint of dissent.

A million or more Muslim Uighurs are in reeducation camps. A national campaign is in full swing to suppress religious faith, with an effort to turn churches into propaganda chambers for the CCP. Internet censorship is tighter; academic exchanges are tougher. Political education is being reinstated for students. Journalists are being tested for their loyalty to the new Red Emperor. The latter pushed the party to dump term limits for the president and broke with precedent in jailing former top officials. Now no one imagines Xi voluntarily yielding power, since he would be an obvious target of retaliation.

Extirpating religious faith is high on Beijing’s priority list, along with exacting political subservience. 

Perhaps the creepiest tool of repression is the social credit system. The ultimate aim appears to be a unified system by which the state rates peoples’ and businesses’ behavior, rewarding and punishing accordingly. The system would essentially establish a “credit” rating for individuals and firms. Be a good citizen and you get financial discounts, better loan terms, and exemption from deposit requirements. Fail to meet the state’s criteria and your child can forget getting into a good university. If the government judges you to be socially bankrupt, you can’t buy a train ticket, rent a hotel room, or even use a credit card. In the future you might be banned from online dating. Companies could be treated similarly, with disparate treatment in terms of taxation, credit, public procurement, and more. Commerce Ministry Spokesman Gao Feng insisted the CCP’s merely aimed “to create a more standardized, fair, transparent, and predictable legal business environment.” 

Today, the social credit process remains incomplete, a mix of national government blacklists, local government pilot programs, official business regulation, and private rating systems. Time’s Charlie Campbell describes an “overlapping mishmash of commercial and state-run systems.” However, in the future more oppressive control is likely to be exercised by the central government. Already localities have been targeting religious believers. Extirpating religious faith is high on Beijing’s priority list, along with exacting political subservience. Today, Chinese seek to enhance their rating by demonstrating their loyalty to Xi and the CCP. Moreover, noted Campbell, “In one region, neighborhoods have dedicated watchers to record deeds and misdeeds.” The social credit system is expected to become the ultimate means of political control. 

A number of Chinese companies are involved in making the system work practically. One is the ZTE Corporation, which has worked on a system of “smart cards” using RFID (radio-frequency identification) and QR (Quick Response) codes. Unfortunately. Beijing is profiting both economically and politically by exporting this system. 

In recent years, the regime has been promoting what it calls the Beijing Consensus, in opposition to the Washington Consensus. The PRC offers the possibility of economic development alongside political dictatorship. Countries such as Zimbabwe, Burma, and Sudan, under sanction from the West, avidly turned to the PRC. However, the relationship has not been without controversy, since Beijing does little out of charity. For instance, in Burma the military desired to loosen China’s tight embrace and allow a measure of democracy to end the West’s economic cordon sanitaire. In Zambia, China became an election issue and contributed to the government’s defeat.  

Nevertheless, some dictatorships in the developing world remain willing to sacrifice sovereignty for control. A decade ago, Venezuela’s Hugo Chávez sent officials to China to learn about its national ID program. The PRC’s system was expected to do much more than identify participants, with plans to monitor and record behavior. Initially, the Chávez government hired a Cuban firm for $172 million to make millions of ID cards.

A member of Venezuela’s delegation, Anthony Daquin, the justice ministry’s top information security adviser, told Reuters, “What we saw in China changed everything.” He recognized the potential threat to liberty, observing that officials “were looking to have citizen control.” When Daquin raised these concerns, he was detained and beaten. After he essentially bought his release from his security agents, he fled abroad. 

In succeeding years, nothing much happened. The Caracas regime was spectacularly incompetent and corrupt, and seemed capable of doing little more than wrecking the economy and social order. Chávez’s death in 2013 also created political instability, as the regime desperately sought to maintain power by manipulating the rules and oppressing its opponents.

Last year, the Venezuelan government – driven to bankruptcy more by its own socialist follies than U.S. sanctions – hired ZTE Corp. to create a national ID system to protect “national security.”

However, three years ago the 1984 nightmare reemerged, as the government again considered creating its own social credit system. Last year, the Venezuelan government – driven to bankruptcy more by its own socialist follies than U.S. sanctions – hired ZTE Corp. to create a national ID system to protect “national security.” With food scarce, medicine nonexistent, and inflation beyond measure, the Nicolás Maduro regime is spending $70 million to create a national database and mobile payment system. “A team of ZTE employees is now embedded in a special unit within Cantv, the Venezuelan stat telecommunications company that manages the database,” reported Reuters.

No one believes that the program is innocent. Already, the regime distributes heavily subsidized food boxes for its political advantage. Maduro’s cronies, under siege at home and abroad, are almost certainly seeking to monitor Venezuelans and improve the government’s ability to reward and punish them accordingly. The system, reported Reuters, “stores such details as birthdays, family information, employment and income, property owned, medical history, state benefits received, presence on social media, membership of a political party and whether a person voted.” This information is obviously useful for a repressive government and correspondingly dangerous for individuals.

Maduro has been urging Venezuelans to sign up for the ID card to “build the new Venezuela.” Even though his regime has been doing far more destroying than creating, millions have followed his advice. Of course, the regime has rewarded those who did and punished those who did not. Government employees face special pressure to join; public benefits, including health care and pension payments, require signing up. Opposition legislator Mariela Magallanes told Reuters that “the government knows exactly who is most vulnerable to pressure.” A former minister in the Chávez government, Hector Navarro, called the plan “blackmail,” warning that “Venezuelans with the cards now have more rights than those without.”

Reuters contacted the head of ZTE’s Venezuelan unit, who argued that no laws were being broken and the firm had no control over Caracas’ use of the technology, that the company was not backing the government but simply “developing our market.” This may be true, but it is also irrelevant. ZTE understands how the Maduro regime is likely to abuse the system. And Beijing’s policy is to stand by tyrannical rulers such as Maduro, who publicly thanked the PRC for its assistance. Indeed, at least some of the funding is coming from the Venezuela China Joint Fund, a bilateral program. The “Beijing Consensus” is taking another ugly turn.

There is no simple political answer to the PRC’s return to Maoist totalitarianism. Contra the claims of some, America has few means to forcibly transform other nations politically, especially a great power with nuclear weapons. And having failed in its efforts to oust Maduro, Washington is unable to halt China’s effort to strengthen oppression in Venezuela – or spread such systems elsewhere.

Still, the God-given desire for liberty persists around the world. It is important that Americans never stop supporting human life, freedom, and dignity. Someday, we hope and pray, the victims oppressed by China and its tyrannous allies will receive justice and enjoy a better future.

Featured image credit: Fabio Rodrigues/ABr (CC BY 3.0). Image cropped.


Doug Bandow is a Senior Fellow at the Cato Institute and former Special Assistant to President Ronald Reagan. He is the author of Foreign Follies: America’s New Global Empire.