Using Game Theory to Look at China’s Social Credit System

By Alon Küster


In this article, I will examine a specific government’s attempt at limiting the negative outcomes of game theory in practice and on a national scale. Looking at China’s social credit system, I will analyse how it regulates the behaviour of its population by enforcing certain outcomes through incentives and punishments. While discussing all the benefits created by such an endeavour, I will simultaneously touch upon several practical drawbacks and ethical downsides. 

It is important to remember when discussing China’s system that many Western countries have something similar. Germany, for instance, has a system that tracks whether you pay back your loans on time or whether you are in debt etc. The bottom line is that China views this more holistically. A key difference is how China uses its system on economic reliability in tandem with other parts of daily life.

What Is Game Theory?

Surely, we have all heard of Game Theory as International Relations students. For those of our readers who do not remember this concept, it can be summarized as a theoretical way to investigate scenarios in which there are interacting players, each with their own, usually conflicting, interests. It includes different interactions and outcomes, which vary depending on the strategies chosen by the players. Game Theory is often a useful way to examine social situations.

A Positive View on the System

In order to denote how positive outcomes are incurred in Game Theory, economists bring up the importance of repeated interactions alongside the use of punishments or rewards that apply to future interactions. For example, behaving selfishly is considered counterproductive for society as a whole. Thus, China has devised a system that applies these concepts economists bring up, to ensure the production of desirable results. China applies the enforcement of these concepts using technology. 

Two crucial elements of Game Theory, incentives and punishments, play an active role within the system and guide the actions of individuals. For instance, an incentive can be subsidies for public transport whereas punishment can be paying a fine. The system effectively encourages individuals to pursue outcomes that are considered socially desirable in which case they will be rewarded. It discourages pursuing negative outcomes with the threat of punishment. 

Through technology, the Chinese government observes and categorizes behaviour among the population, assigning them different positive or negative values. For pursuing behaviour that is considered positive, said system assigns the individuals a positive value. Likewise for pursuing negative behaviour. While not a lot is known about what constitutes as negative or positive behaviour, it can be assumed for examples’ sake that littering yields a negative outcome and paying taxes yields a positive one. In this sense, the government has created an environment to enforce socially desirable outcomes. 

Finally, the existence of the system provides an incentive for most interactions to become, or to be viewed as, repeated interactions.  Each action of an individual carries consequences over to the future, regardless of the fact that the initial parties involved may have changed. Individuals must therefore be aware of the long-term implications of their actions. As the system categorises different actions on the bases of being socially desirable or not, individuals are expected to undertake actions that will improve the long-term state of society. Ideally, in each case, the outcome that occurs helps both society and individuals in the long run.

A Negative View on the System

For some economists, this machine works pretty good as it increases the efficient use of resources for the state. For liberal economists, however, it poses an obvious issue. Namely, a bureaucratic body that dictates what is considered as a good outcome runs the machine, and the body does not leave the choice up to the individual. 

In the West, the social credit system of China has been described as very Orwellian and there certainly is no denying that it has increasingly became as such. Recently, the Global Times shed light on the fact that the government has stopped individuals from travelling. The government’s potential to shut down political dissent is enormous, considering the surveillance employed to run the system effectively. Furthermore, the system significantly infringes on several human rights, privacy of the individual being one of them, by monitoring the actions of individuals at most points of their lives. The system can even track a person from birth if implemented correctly. In theory, it can eventually know more about you than you know about yourself. 

Another limitation of the system is that it is imperfect. There have been incidents in which people were falsely accused of acts they did not commit, and these can keep happening. These glitches can be very detrimental because individuals will need to pay certain costs for their innocence, so to speak. This clearly reduces the legitimacy of the system. If it does not work as intended, the result can be the complete mitigation of “good” social behaviour and significant punishment of blameless individuals. 

It is difficult for individuals who possess a negative score in the system to find a way out. These individuals have multiple luxuries (or rights, depending on how we define the free choice to travel) taken away from them. Punishment has a diminishing effect on individuals and eventually the mental state of an individual ‘resets’ leading to the punishment having a constricting effect. The result is a negative feedback loop in which the individual sees no reason to undertake positive action. It can therefore be extremely damaging for the individuals to have a negative score early in their lives. Just like individuals mixing with the wrong people during prison leading them to commit more crime later on in life. 

Admittedly, many non-Western states place security and surveillance over human rights. For these states, China being an especially rigorous one of them, the system emphasizes this prioritization. It should further be noted that the system will likely spur considerable economic growth which would help develop an already heavily influential country. 

Concluding Thoughts

Enforcing positive outcomes out of Game Theory requires dramatic changes. China’s social credit system is an excellent example of this. In this article, I have explained China’s social credit system by laying out its central ideas in theory as well as in practice and presenting its positive and negative aspects. Although there are many benefits to such a system, I questioned whether these outweigh the significant downsides and explained how these downsides are perceived through the Western lens. 

The question boils down to whether order should be valued over freedom, especially considering the implications of Game Theory. Order produces socially desirable outcomes, usually inspires mutual gains, and creates a stable macro-economic environment. Freedom might imply each individual following their own self-interest without considering different and sub-optimal outcomes. It also allows significant vocal political dissent to grow. 

In my view, neither freedom nor order alone is the right way forward for a country. There must be a calculated mix of both in order to facilitate successful development. Freedom is not always optimal, as individuals may not know the true implication of their actions. Order is not always optimal as it homogenizes behaviour and limits thinking outside the box. Indeed, without Deng Xiaoping, an individual who thought about economic activity in a revolutionary way and eventually made China adopt market policies, where would China be?


Edited by Sasha Zinchenco

Artwork by Chira Tudoran