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.
This was really interesting and I hope you'll return to this subject again in the future. Also, I look forward to your Qing tombs trip report.
May I ask do you know if Mr Shan is thinking of, or can be encouraged to join Substack? His insightful thoughts and analysis are well enumerated, and deserves a wider audience. I call him the numbers guy because his essays always have the stats and figures neatly contained in a few paragraphs (perhaps to not frighten the innumerate?)
I love a well-chosen number, because as a picture paints a thousand words, a good statistic enlightens concisely.
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.
Interesting account. I think the transition from low trust to high trust happens in almost every society including in the West. In part, as income and living standards rise, we value integrity more than before. An economist might say that “integrity” and “trust” is a Griffin good.
I know in my own country, trust has risen. I used to challenge my Malaysian friends who complain about bad behaviour among Chinese tourists (eg cutting queue). The Chinese only recently emerged from poverty. No doubt the next generation of Chinese will be wealthier than us Malaysians and will think we are so uncouth!🤣
Great article thanks for writing it. I have noticed a big difference with younger Chinese who come to South East asia. A decade or so ago when the first large scale Chinese tourists began coming here they were mostly loud, bad mannered, badly dressed, pushy etc Today its quite different the younger generation is very polite, well dressed, waits in line patiently etc. even most of the older ones are much better, however there is still the occasionally the odd older one who tries pushing in line etc. But the change is very noticable.
China is a high trust society. People don’t steal things, they don’t rob each other, at least not on the street. Perhaps there is distrust in the corporate or between the government and the people or within the government? But from what I see, Chinese culture is a high trust culture.
recently had an accident not too different to Robert's, a car backing up and hit me from the front. dashcam footage provided valuable and indisputable evidence.
Thanks for your insights. I'm assuming you are familiar with Joseph Henrich and the concept of WEIRD. What is your perspective on the Chinese stock market and the psychology of the Chinese public with regard to it? From what I'd read, I assumed Chinese people were too diligent and risk-averse to put their money in what they consider to be speculative( stocks), but in another of your articles you mentioned a "short-term" mentality when it comes to investment time horizons. Could you elaborate?
I am not sure of the purpose of this article, but it is hard to imagine the PRC trying to become a high trust society. The authoritarian government of the CCP has created a high surveillance state that makes everyone anxiety-ridden. When the Covid virus morphed into a much less lethal, but more contagious cold like flu, the world celebrated, but what did the CCP do? They stuck to their guns and imposed horrific lockdowns for weeks and months for people who live in very small apartments. The desperation of people having to endure that, week after week, all for the sake of the face of the government created a new low In trust. At the same time, the party reasserted its power against the tech companies and they crushed the private real estate sector finance mechanism. Chinese have 90% their assets in real estate and prizes for the past few years have been declining close to double digits. Low trust.
I live in China and I don’t feel anxiety-ridden for the cameras. I would prefer them to exist rather than not. I was in Shanghai during the lockdown and there were no guns and it’s not horrific. You eat your own propaganda too hard and dont know what you are talking about.
Not propaganda at all, I spoke daily to colleagues trapped in their 300/400 sq ft apartments for weeks and months. It was horrible for them. I wonder who you are supporting.
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
This was really interesting and I hope you'll return to this subject again in the future. Also, I look forward to your Qing tombs trip report.
May I ask do you know if Mr Shan is thinking of, or can be encouraged to join Substack? His insightful thoughts and analysis are well enumerated, and deserves a wider audience. I call him the numbers guy because his essays always have the stats and figures neatly contained in a few paragraphs (perhaps to not frighten the innumerate?)
I love a well-chosen number, because as a picture paints a thousand words, a good statistic enlightens concisely.
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.
Interesting account. I think the transition from low trust to high trust happens in almost every society including in the West. In part, as income and living standards rise, we value integrity more than before. An economist might say that “integrity” and “trust” is a Griffin good.
I know in my own country, trust has risen. I used to challenge my Malaysian friends who complain about bad behaviour among Chinese tourists (eg cutting queue). The Chinese only recently emerged from poverty. No doubt the next generation of Chinese will be wealthier than us Malaysians and will think we are so uncouth!🤣
Great article thanks for writing it. I have noticed a big difference with younger Chinese who come to South East asia. A decade or so ago when the first large scale Chinese tourists began coming here they were mostly loud, bad mannered, badly dressed, pushy etc Today its quite different the younger generation is very polite, well dressed, waits in line patiently etc. even most of the older ones are much better, however there is still the occasionally the odd older one who tries pushing in line etc. But the change is very noticable.
Thanks for the comment. Great to see my observations are not alone!
China is a high trust society. People don’t steal things, they don’t rob each other, at least not on the street. Perhaps there is distrust in the corporate or between the government and the people or within the government? But from what I see, Chinese culture is a high trust culture.
definitely not like that 20 years ago
Unfortunately, staged accidents for insurance fraud have become common everywhere, so a dashcam is a necessity https://youtube.com/watch?v=jvklFa7gdYA
i second that.
recently had an accident not too different to Robert's, a car backing up and hit me from the front. dashcam footage provided valuable and indisputable evidence.
Thanks for your insights. I'm assuming you are familiar with Joseph Henrich and the concept of WEIRD. What is your perspective on the Chinese stock market and the psychology of the Chinese public with regard to it? From what I'd read, I assumed Chinese people were too diligent and risk-averse to put their money in what they consider to be speculative( stocks), but in another of your articles you mentioned a "short-term" mentality when it comes to investment time horizons. Could you elaborate?
I am not sure of the purpose of this article, but it is hard to imagine the PRC trying to become a high trust society. The authoritarian government of the CCP has created a high surveillance state that makes everyone anxiety-ridden. When the Covid virus morphed into a much less lethal, but more contagious cold like flu, the world celebrated, but what did the CCP do? They stuck to their guns and imposed horrific lockdowns for weeks and months for people who live in very small apartments. The desperation of people having to endure that, week after week, all for the sake of the face of the government created a new low In trust. At the same time, the party reasserted its power against the tech companies and they crushed the private real estate sector finance mechanism. Chinese have 90% their assets in real estate and prizes for the past few years have been declining close to double digits. Low trust.
I live in China and I don’t feel anxiety-ridden for the cameras. I would prefer them to exist rather than not. I was in Shanghai during the lockdown and there were no guns and it’s not horrific. You eat your own propaganda too hard and dont know what you are talking about.
Not propaganda at all, I spoke daily to colleagues trapped in their 300/400 sq ft apartments for weeks and months. It was horrible for them. I wonder who you are supporting.