CHINA

C hina’s economic freedom score is 59.5, making its economy the

103rd freest in the 2020 Index. Its overall score has increased by 1.1
points due to increases in scores for business freedom and property
rights. China is ranked 20th among 42 countries in the Asia–Pacific
region, and its overall score is below the regional and world averages.

China’s economic freedom score has improved over the past five years,
with most of the gains coming in areas related to the rule of law and,
more recently, business regulation. The overall gains track with a con-
tinuing high rate of GDP growth.
WORLD RANK: REGIONAL RANK:

103 20 Major reforms of the financial system have not occurred, but there is
hope that a new investment law that is expected to take effect in 2020
may improve regulatory transparency. Overall, the economic freedom
ECONOMIC FREEDOM STATUS:
that does exist in China lacks depth and breadth, and the government
MOSTLY UNFREE needs to ensure that business-friendly policy changes are understood
and implemented nationwide, not just in Beijing or the major commer-
cial centers.

ECONOMIC FREEDOM SCORE

59.5 ▲ UP 1.1 POINTS



0 50 60 70 80 100

REGIONAL AVERAGE
(ASIA-PACIFIC REGION) 61.1 61.6 WORLD
AVERAGE

HISTORICAL INDEX SCORE CHANGE (SINCE 1995): +7.5

RECENT FREEDOM TREND QUICK FACTS

70

POPULATION: UNEMPLOYMENT:
59.5 1.4 billion 4.4%
60 57.4 57.8 58.4
GDP (PPP): INFLATION (CPI):
$25.3 trillion 2.1%
52.0 6.6% growth in 2018
FDI INFLOW:
50 5-year compound
$139.0 billion
annual growth 6.9%
$18,110 per capita PUBLIC DEBT:
50.5% of GDP
40

2016 2017 2018 2019 2020 2018 data unless otherwise noted. Data compiled as of September 2019

BACKGROUND: Xi Jinping succeeded Hu Jintao as president of China in 2013. Xi has centralized his
authority, ousted internal political enemies, 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
below the global average. A slowdown in economic growth, which may be more severe than is officially
acknowledged, poses serious challenges, both for the government and for Xi’s new ideological economic
framework. Since 2017, the U.S. and China have been engaged in serious trade negotiations that have been
accompanied by the imposition of tariffs by both sides. The outcome of these negotiations will likely have
a significant impact on the global economy.

176 2020 Index of Economic Freedom

 WORLD AVERAGE | ONE-YEAR SCORE CHANGE IN PARENTHESES

12 ECONOMIC FREEDOMS | CHINA

RULE OF LAW GOVERNMENT SIZE
(+11.0) (+1.1) (–3.1) (No change) (–2.2) (–8.5)

100 100

80 80

70 70

60 60

50 50

60.9 76.3 46.0 70.4 67.9 67.5

0 0
Property Judicial Government Tax Government Fiscal
Rights Effectiveness Integrity Burden Spending Health

Theft of foreign-owned intellectual property is widespread.
All land in China is owned either by the state or by rural col-
lectives. Government agencies and the Chinese Communist
Party heavily influence the judicial system. Courts lack the
sophistication and educational background needed to under-
stand complex commercial disputes and operate without
transparency. Corruption remains endemic. The absence of
a free press and the lack of governmental capacity hamper
anticorruption efforts.
The top personal income tax rate is 45 percent, and the top
corporate tax rate is 25 percent. Other taxes include val-
ue-added and real estate taxes. The overall tax burden equals
17.5 percent of total domestic income. Government spending
has amounted to 32.7 percent of the country’s output (GDP)
over the past three years, and budget deficits have averaged
4.1 percent of GDP. Public debt is equivalent to 50.5 percent
of GDP.

REGULATORY EFFICIENCY OPEN MARKETS


(+20.6) (+0.2) (–0.8) (–0.6) (–5.0) (No change)

100 100

80 80

70 70

60 60

50 50

76.8 64.4 71.1 72.4 20.0 20.0

0 0
Business Labor Monetary Trade Investment Financial
Freedom Freedom Freedom Freedom Freedom Freedom

China has made some business-friendly reforms, but the
government continues to protect and favor its nontransparent
state-owned enterprises, as well as private enterprises that
are deemed “national champions,” providing both types of
firms with substantial state subsidies. Labor laws are changed
frequently and applied differently in different localities. There
are price controls for essential goods and services.
The total value of exports and imports of goods and services
equals 38.2 percent of GDP. The average applied tariff rate is
3.8 percent, and 385 nontariff measures are in force. A new
Foreign Investment Law of the People’s Republic of China
may improve the transparency of foreign investment policies,
but it will not take effect until 2020. The state maintains its
tight grip on the financial system.

The Heritage Foundation | heritage.org/Index 177