By Clay Chandler
December 16, 2017

Over the past few weeks Fortune colleagues and I have written at length about China’s rise as an “innovation superpower,” particularly in sectors involving the Internet, e-commerce and mobile payment. We’ve marveled at the scale of China’s two largest tech giants, Alibaba Group and Tencent Holdings, and extolled the creativity and convenience of the multitude of the services they offer. Some of you have written to remind us of Beijing’s strict censorship of the Internet. Even so, my view remains that China has emerged as the biggest, liveliest and most sophisticated digital marketplace in the world.

But I’ve also expressed unease in this space about the fact that in China’s tech sector, even more than in America’s, an enormous amount of market power is concentrated in the hands of a few giant firms, with few safeguards for individual privacy. In a thoughtful essay in WIRED, Mara Hvistendahl examines how Zhima Credit, a digital consumer lending service operated by Alibaba affiliate Ant Financial, collaborates with Alipay, the group’s mobile payment platform, to generate a credit scoring system for Chinese citizens that is based on a far wider range of metrics than those available to American credit bureaus. Zhima Credit’s algorithms are a corporate secret. Ant acknowledges, however, that beyond conventional credit data, the score reflect conclusions drawn from users’ consumption patterns and social habits, as well as those of friends to whom they’re digitally connected.

Hvistendahl also reviews the government’s aspirations to create a “social credit score” to reward loyal, well-mannered citizens and punish those engaging in “bad behavior.” Over the past decade, she reports, Beijing has experimented with pilot social credit score programs in “dozens of cities.” So far, those efforts have been clumsy and ineffective. But now, thanks to advances by Ant and other private tech firms, the ability to gather and analyze data about individual behavior is catching up with official ambitions.

Will Beijing allow local governments to demand access to privately collected data? It’s too soon to say. But it must be a powerful temptation. China’s central bank has ordered mobile payment companies connect to a central clearing house so regulators can see their transaction data, and China’s cyber czar has hinted the Beijing might take a 1% stake in the nation’s major tech companies.

I’ve also noted that Chinese startups, among them Alibaba-backed Face++, are on the cutting edge of facial recognition technologies. To demonstrate the potential of that technology when put to the services of China’s 170 million CCTV cameras, BBC reporter John Sudworth this week teamed with the municipal police department of Guiyang in a stunt worthy of Jason Bourne. Sudworth was turned loose in the center of the city and challenged to elude its video surveillance network. He managed to last all of seven minutes before getting nabbed by the authorities.

Enjoy the weekend!

Clay Chandler


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