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12 August 2003

Wall Street Journal, August 12, 2003

### China Begins Effort to Replace Citizen IDs With Digital Cards

By Andrew Batson

Dow Jones Newswires

BEIJING -- China is about to embark on the world's biggest experiment in the use of electronic identification cards, which next year will begin to replace the paper national ID cards carried by 960 million Chinese citizens.

The core of the new ID cards is an embedded microchip storing an individual's personal information, which can be read electronically and checked against databases kept by China's security authorities. Residents of most major cities also will carry other chip-based cards that control access to social services.

This massive transformation of how the government interacts with its citizens is proceeding nearly unnoticed by anyone outside a small circle of bureaucrats and industry executives. There has been little public debate on the costs and benefits of the programs, and China's state-run media have been mostly silent on the issue.

In their public justification for the new cards, Chinese officials have focused on how the cards can help solve a major law-enforcement problem: Paper IDs can be forged easily, contributing to fraud and financial crime. The plastic cards should be much harder to counterfeit.

"There is a genuine need for modernization of the ID system to enable the police to fight genuine crime," said Peter Humphrey, China country manager for Kroll Inc., a New York company specializing in security and risk assessment.

The amount of information to be stored on the new personal-identification cards is dwarfed by the data on social-security cards coming into use in many of China's big cities. These conveniently link account information for all the government services that a person receives, including medical care, welfare benefits and employment assistance.

The Ministry of Labor and Social Security plays down privacy concerns, saying encryption systems on the cards will prevent unwanted crossover, such as an employer getting information about an employee's medical history. The ministry will control the huge databases being built to store the detailed records.

"We can use this information to better research macro-level policies" such as changes in benefits or the retirement age, said Wang Dongyan, who heads the ministry's information-systems department. He plans eventually to link the social-security databases to those of other ministries, such as security and education.

By the end of 2002, about 20 major cities had launched social-security-card programs, and more than 10 million cards were in circulation, some of them supplied by foreign card makers, including Schlumberger Ltd., of New York. But the Ministry of Public Security is keeping contracts for the ID card mostly limited to a tight group of domestic companies.

Exceptions are French defense and electronics group Thales SA and Israeli company On Track Innovations Ltd., which have said they are supplying technology to the ID-card project. Neither responded to requests to discuss their involvement in the project.

According to a Chinese industry executive, the security ministry likely will award its remaining contracts this year, allowing trials to begin in 2004, with large-scale issuance by 2005. As many as 800 million of the cards could be in use by 2006, some reports predict.

China's program has added to the international debate on so-called smart ID cards, which have met opposition from privacy advocates in the U.S., the U.K. and Australia while being accepted by some European and Asian countries. Critics say such a system reduces the confidentiality of personal data and creates the potential for misuse by the government or companies that have access to the information.

China's ID-card law doesn't have any provisions controlling how the government or companies can gather and use personal information.

Song Gongde, a legal expert at the National School of Administration in Beijing, says he was encouraged by a provision in China's ID law, passed in June, that strictly limits the kinds of data that can be put on the ID card, including name, birth date and the 18-digit citizen ID number. But the law doesn't give citizens the right to see or correct their personal information, whether it is stored on a card or elsewhere.

The introduction of the cards will be accompanied by a major upgrade of the security ministry's databases and computer systems, analysts say. China's security forces, which investigate political misdeeds as well as other crimes, have been enthusiastic users of technology -- for instance, to monitor Internet and e-mail traffic -- and face few curbs on how they can use such technology.

"The absence of a counterweight is worrying, especially in China where the legal system is very deficient," said Nicolas Becquelin, the research director for rights group Human Rights in China.

-- From Dow Jones Newswires

Write to Andrew Batson at andrew.baston@dowjones.com