This and other automated tracking/recording/etc methods will basically make privacy a thing of the past. It should be illegal, because without privacy, there can't be democracy (see the Facebook scandals as an example).
And ol' Grandma Francine doesn't scale. Her bad behaviors can't bend the very social fabric of society, nor is she corrupting the public square by abusing her knowledge of the townspeople to sell them things and "nudge" them and manipulate them; Grandma Francine is very talkative but not necessarily that bright, certainly not "we hired every PhD who we could get our hands on and turned them loose with an open expense line to buy hardware with" sorts of smart and manipulative.
In addition, moving was even more devastating then than it can be now. Mutual aid and social networks were everything, outsiders not trusted.
You would have to suspect that the Chinese government aren’t missing this aspect.
Wouldn't surprise me if China essentially made privacy illegal some time in the future.