CHINA
C hina’s economic freedom score is 58.4, making its economy the
100th freest in the 2019 Index. Its overall score has increased by 0.6
point, with higher scores on judicial effectiveness and labor freedom
outpacing a sharp drop in fiscal health. China is ranked 20th among 43
countries in the Asia–Pacific region, and its overall score is below the
regional and world averages.
Increasing tensions in the U.S.–China economic relationship have height-
ened business uncertainties, and despite still impressive growth rates,
the government adopted looser economic policies in 2018 to mitigate
WORLD RANK: REGIONAL RANK: mounting risks to future growth. China remains “mostly unfree.” Non-
100 20 transparent state-owned enterprises dominate the financial sector and
many basic industries. The official ideology of “Socialism with Chinese
Characteristics” has chilled liberalization, heightened reliance on mer-
ECONOMIC FREEDOM STATUS:
cantilism, raised bureaucratic hurdles to trade and investment, weakened
MOSTLY UNFREE
the rule of law, and strengthened resistance from vested interests that
impede more dynamic economic development.
ECONOMIC FREEDOM SCORE
58.4 ( UP 0.6 POINT )
0 50 60 70 80 100
REGIONAL AVERAGE
(ASIA-PACIFIC REGION) 60.6 60.8 WORLD
AVERAGE
RELATIVE STRENGTHS: HISTORICAL INDEX SCORE CONCERNS:
Fiscal Health and CHANGE (SINCE 1995): Financial Freedom and
Judicial Effectiveness +6.4 Investment Freedom
FREEDOM TREND QUICK FACTS
70
POPULATION: UNEMPLOYMENT:
1.4 billion 4.7%
60 57.4 57.8 58.4
GDP (PPP): INFLATION (CPI):
$23.2 trillion 1.6%
52.7 52.0 6.9% growth in 2017
FDI INFLOW:
50
5-year compound
$136.3 billion
annual growth 7.1%
$16,660 per capita PUBLIC DEBT:
47.8% of GDP
40
2015 2016 2017 2018 2019 2017 data unless otherwise noted. Data compiled as of September 2018
BACKGROUND: Communist Party General Secretary Xi Jinping’s regime has produced no significant
free-market reforms since taking power in 2013. Xi has centralized his authority, ousted internal political ene-
mies, and backed authoritarian policies to tighten control of civil society. China is the world’s second-largest
economy and biggest exporter, but its per capita income is still below the global average. A slowdown in
economic growth, which may be more severe than official statistics indicate, poses serious challenges for a
government whose legitimacy depends increasingly on its ability to raise living standards. Much will depend
on how well Xi’s new ideological economic framework translates into government policy. Xi’s “China 2025”
program to achieve Chinese dominance of high-tech sectors has engendered pushback from global rivals.
144 2019 Index of Economic Freedom
WORLD AVERAGE | ONE-YEAR SCORE CHANGE IN PARENTHESES
12 ECONOMIC FREEDOMS | CHINA
RULE OF LAW GOVERNMENT SIZE
(+3.2) (+9.8) (+1.8) (No change) (–1.5) (–9.9)
100 100
80 80
70 70
60 60
50 50
49.9 75.2 49.1 70.4 70.1 76.0
0 0
Property Judicial Government Tax Government Fiscal
Rights Effectiveness Integrity Burden Spending Health
All land in China is owned by the state, and protec- The top personal income tax rate is 45 percent,
tion of foreign intellectual property is inadequate. and the top corporate tax rate is 25 percent. Other
The judicial system is heavily influenced by govern- taxes include value-added and real estate taxes.
ment agencies and the Chinese Communist Party. The overall tax burden equals 17.5 percent of
Corruption remains endemic, and the leadership total domestic income. Over the past three years,
has rejected fundamental reforms such as requiring government spending has amounted to 31.6 percent
public disclosure of assets by officials, creating of the country’s output (GDP), and budget deficits
genuinely independent oversight bodies, or lifting have averaged 3.5 percent of GDP. Public debt is
political constraints on journalists. equivalent to 47.8 percent of GDP.
REGULATORY EFFICIENCY OPEN MARKETS
(+1.3) (+2.8) (+0.5) (–0.2) (No change) (No change)
100 100
80 80
70 70
60 60
50 50
56.2 64.2 71.9 73.0 25.0 20.0
0 0
Business Labor Monetary Trade Investment Financial
Freedom Freedom Freedom Freedom Freedom Freedom
Elimination of the minimum capital requirement has The combined value of exports and imports is equal
made it easier to launch a new business, but the over- to 37.8 percent of GDP. The average applied tariff
all regulatory framework remains complex and uneven. rate is 3.5 percent. As of June 30, 2018, according
The labor market remains tightly controlled. Imple- to the WTO, China had 365 nontariff measures in
mentation guidelines on labor issues often differ from force. China’s restrictive foreign investment approval
agency to agency, and labor laws are applied differ- system shields inefficient state-owned enterprises
ently in different localities. The government subsidizes from competition from private and foreign compa-
numerous state-owned enterprises and is committed nies. The government maintains its tight grip on the
to price controls for essential goods and services. financial system.
The Heritage Foundation | heritage.org/Index 145
