They could have done the same with direct cash transfers, but here they're leveraging the credit system to make it less blatant (you can pretend to yourself the loan you got wasn't because you pushed your neighbour into withdrawing those posts) and seemingly more rewarding (they just need to finance whatever increased bad credit it causes, so the overall amounts will be larger than if they spent the same on direct transfers).
As a credit score, yes, it's clearly flawed. As a means of controlling the population? It remains to be seen how it'll work for them, but the cost/benefit tradeoff for the Chinese government is whether it costs more or less than maintaining the same control with police and censors.
