CHINA
Economic Freedom Score
25
World Rank:
139
Regional Rank:
30
Least
free 0
economic freedom score is 52.7, making its economy
Cpointhina’s
the 139th freest in the 2015 Index. Its overall score is 0.2
higher than last year, with modest improvements in
50
75
Most
100 free
52.7
Freedom Trend
54
freedom from corruption, business freedom, and labor freedom largely offset by declines in investment freedom and the
control of government spending. China is ranked 30th out of
42 countries in the Asia–Pacific region, and its overall score is
lower than the global and regional averages.
Over the past five years, economic freedom in China has
improved by less than 1.0 point, continuing its patchy and
uneven progress since 1995. The one bright spot has been an
8.1-point improvement in labor freedom since 2011. A restrictive residency permitting system remains in place, and gains
in labor freedom have been largely offset by losses in other
factors, including a 5.5-point decline in the control of government spending.
A more comprehensive set of economic reforms is desperately needed, especially a loosening of the government’s
stranglehold on investment flows. The Communist Party’s
control of all levels of government continues to undermine
confidence in the rule of law and interfere with the development of an independent judiciary. Institutionalized cronyism
is prevalent.
BACKGROUND: Under the government of Communist Party
General Secretary Xi Jinping, China has talked about the need
for economic “rebalancing” (the shifting of power and wealth
from state-owned enterprises and local governments to the
household sector), but real changes in power relationships
have been hard to detect. Reforms to improve labor mobility
have gained no traction. Tensions in the South and East China
Seas have increased with Beijing’s unilateral declaration of
an Air Defense Identification Zone and its deployment of an
oil rig in Vietnamese waters. China has achieved impressive
GDP growth based on economic reforms and greater integration into the world trading and financial systems since the late
1970s. The size of its industrial and manufacturing sector now
rivals that of the United States.
How Do We Measure Economic Freedom?
See page 475 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.
53
52
51
50
2011
2012
2013
2014
2015
Country Comparisons
52.7
Country
World
Average
60.4
Regional
Average
58.8
Free
Economies
84.6
0
20
40
60
80
100
Quick Facts
Population: 1.36 billion
GDP (PPP): $13.4 trillion
7.7% growth in 2013
5-year compound annual growth 8.9%
$9,844 per capita
Unemployment: 4.6%
Inflation (CPI): 2.6%
FDI Inflow: $123.9 billion
Public Debt: 22.4% of GDP
2013 data unless otherwise noted.
Data compiled as of September 2014.
163
CHINA (continued)
THE TEN ECONOMIC FREEDOMS
Score
RULE OF
LAW
Country
World Average
Property Rights 20.0
Freedom from Corruption 40.0
0
20
40
60
80
Rank
1–Year
Change
138th
80th
0
+5.0
100
Xi Jinping began his first year in power with an anti-corruption campaign that netted several
high-ranking officials, but corruption remains endemic. With Chinese cyber espionage visibly
on the rise in 2014, protection of property rights has clearly deteriorated. China’s weak judicial
system is highly vulnerable to political influence. The giant urban migrant workforce has little
legal protection despite promises of reform.
Fiscal Freedom 69.7
GOVERNMENT
Government Spending 81.5
SIZE
139th
43rd
0
20
40
60
80
–0.2
–1.4
100
China’s top individual income tax rate is 45 percent, and its top corporate tax rate is 25 percent.
Other taxes include a value-added tax and a real estate tax. The total tax burden equaled 19.4
percent of gross domestic product in the most recent year. Total government expenditures
account for 24.8 percent of domestic output, and public debt equals 22 percent of GDP.
REGULATORY
EFFICIENCY
Business Freedom 52.1
Labor Freedom 63.0
Monetary Freedom 74.2
147th
90th
118th
0
20
40
60
80
+2.4
+1.1
+0.9
100
Regulatory reform has progressed gradually and unevenly. Incorporating a business takes 11
procedures and about a month. Bureaucratic hurdles still add to the cost of completing licensing requirements. Labor regulations are relatively flexible, but enforcement of labor laws is not
consistent. The government provides large fossil fuel and electricity subsidies and also funds
significant agricultural subsidies.
OPEN
MARKETS
Trade Freedom 71.8
Investment Freedom 25.0
Financial Freedom 30.0
123rd
158th
131st
0
20
40
60
80
0
–5.0
0
100
China’s average tariff rate is 4.1 percent. Export taxes, subsidies to state-owned enterprises,
anti-dumping barriers, and other measures restrict trade. The government screens foreign
investment and still tightly controls the financial system. State-owned enterprises benefit from
greater access to capital and lower financing costs, but small and medium-sized companies
continue to suffer from the lack of access to credit.
Long-Term Score Change (since 1995)
RULE OF LAW
Property Rights
Freedom from
Corruption
164
–10.0
+10.0
GOVERNMENT
SIZE
Fiscal Freedom
Government
Spending
–0.9
–12.2
REGULATORY
EFFICIENCY
Business Freedom
Labor Freedom
Monetary Freedom
2015 Index of Economic Freedom
OPEN MARKETS
–2.9
–2.0
+5.8
Trade Freedom
+51.8
Investment Freedom –25.0
Financial Freedom
–20.0