The punishment is having a bad monetary credit score. Like with credit score all over the world. There’s nothing more sinister about the Chinese system than anywhere else, where credit scores are a thing. Granted, credit scores, especially for private persons, are pretty sinister in the first place.

What let to this misconception about social credit in China is that there were people suggesting to extend it to more general behavior. You can find people everywhere suggesting crazy shit. Like just this week a part of the conservative party in Germany suggested using the army against protests, but nobody is drawing the conclusion that Germany is preparing Tiananmen 2.0 in the capital. It was lunatics suggesting it anyway.

Have you read about the punishments in the Wiki article?

Check up on the social credit score

There have been widespread misconceptions in media reports about a unified social credit “score” based on individuals’ behavior, leading to punishments if the score is too low or rewards if the score is high.