Right now, physical ID is only required for government services, for the most part. But digital signatures can be extended later to gate all services and purchases, both online and physical, including non-government ones. For example, you can't host a website without a gov approved signature for each website.
Under a system like that, you would rarely find out when the gov refuses to issue a signature, or when any kind of injustice happens, really. Websites where people can talk about bad things happening to them will simply be denied a signature to legally operate, so they're given the ultimatum to "voluntarily" censor posts, or be shut down. It becomes impossible to have this very conversation on a public platform with any kind of meaningful reach. And they already have this kind of system in China, since you brought it up. In fact, they have domestic surveillance systems that make the Snowden disclosures look cute.