Discussion about this post

User's avatar
Robert Wu's avatar

This is the comment from Mr. Shan Weijian, executive chairman of PAG and acclaimed author, who sent me the following through email, and I am posting it in full with his permission:

I didn’t see your low trust society article and I wonder if you referenced Francis Fukuyama’s book “Trust,” published probably before you were born. I taught it since when I was a Wharton professor. China isn’t the only low trust society and there is a strong correlation between trust levels and information availability which in turn is correlated with the level of economic development. In the Robber Baron days in the United States, fraud was rampant. Even today, fraud isn’t infrequent but much better. If you are in banking, you would know. Bernie Madoff is a case in point.

In any case, I wish to make two comments on your musings.

First, it is wrong to suggest that the older generation is less trustworthy than the younger generation. I had an experience similar to yours a few years back in Suzhou: I was driving straight within a marked lane and a car came out of a side street and rammed into the side of my car. He demanded that I pay him to settle it. I had no time to waste with him so I paid him 500 yuan. He was at least a generation younger than me and the case was more obvious than yours: how could I have used the side of my car to ram into the front of his? No it isn’t a generational difference. I can assure you almost all the scammers and fraudsters today are young people, equipped with technology. Yes technology helps catch the bad guys but it also enables them. One thing I can say is that in the past 30 years, the trust or honesty level in China has immensely increased. 20-30 years ago, many businessmen cheated. 10 years ago, there was a public debate about whether their “original sins” should be forgiven. Today, most businesspeople are trustworthy. After all, if you can make money in an honest way, why cheat?

Second, social credit score isn’t China’s invention. I am a banker, I bought more banks than anyone I know in the world, and I published two books in buying and operating banks. China’s credit score system was copied from the US where credit bureaus keep a score and record on almost everyone who has ever banked—through a credit card or a mortgage. If you wish to get a credit card from Macy’s department store, it first checks your credit score from a credit bureau. If you ever forgot to pay your credit card advances by the due date, your score is affected. If you ever defaulted on a credit card loan or a mortgage, you will not be able to get another credit card or mortgage anywhere in the US. At one time, my social security number was stolen and someone obtained credit cards in my name. To this day, I don’t think I can get a credit card in the United States. My repeated appeals to credit bureaus to no avail.

Before the social credit score system, every Chinese bank kept a credit score or profile on its own customers as every bank does in the world. That system didn’t work because, as you suggest, the person rejected by one bank was able to shop around to find another bank or even borrow from one bank to pay back another, creating a nice personal Ponzi scheme. Now banks must share their own credit data with the centralized system, just as in the United States. Without it, the banking system simply doesn’t function, anywhere in the world.

Shan

Expand full comment
She said Xi Said's avatar

Mr Shan may be defending his generation but trust in China has definitely risen as prices become more transparent, and the likelihood of getting blatantly cheated has fallen. Also use of long screaming bouts as a dispute settlement strategy is way down. So I agree with you!

That said, “hidden” fraud (aka financial fraud where you don’t see it and maybe don’t even realize it happened to you) is still a major issue.

This kind of fraud is becoming more and more common in the U.S., from what I can see.

Expand full comment
12 more comments...

No posts

Ready for more?