THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

China

Ranked 90th of 149

At a glance

Ranks

90 th on the Legatum
Prosperity Index™

28th
63rd
123rd
34th
40th
64th
138th
140th
134th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, China performs best on Economic Quality and Education and scores lowest on the Social Capital sub-index.

Visit our Rankings table to see how China compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Like its broad performance in the Index, China’s prosperity gap displays an unbalanced pattern across sub-indices. Substantially over-delivering in Economic Quality, Education, and Health, the country nonetheless faces huge deficits in the Personal Freedom, Social Capital, Natural Environment, and Governance sub-indices. Overall, China’s negative prosperity gap has widened in the past ten years as delivery of social and political benefits has failed to keep up with economic growth.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

The 2016 Prosperity Index captures China as a country with stark internal divergence. On the one hand, the country’s strong socioeconomic development over the past four decades, underpinned by a reasonably safe and stable domestic environment and a deep and continuously improving human capital, has been widely acclaimed as a success unparalleled in history. On the other, the Chinese party-state has one of the tightest control over political and social life, and dazzling economic growth has come at the expense of dirtier air and water as well as withering social capital. Still lagging behind the average prosperity level in the BRICS, let alone its more advanced neighbours in East Asia, China needs to double its efforts to guarantee a prosperous “national rejuvenation”.

GDP per capita changes since 2007 in China, East Asia, and the BRICS
GDP per capita changes since 2007 in China, East Asia, and the BRICS
Prosperity changes since 2007 in China, East Asia, and the BRICS
Prosperity changes since 2007 in China, East Asia, and the BRICS

Despite warnings on a looming debt crisis, the giant wheel of China’s economy keeps moving forward relentlessly. Ever since the introduction of the Reform and Opening-up policies since the late 1970s, the ability of the party-state to bring stability, consistent economic growth, and rising living standards has become a significant pillar of its ruling legitimacy. Since then, more than 800 million Chinese have been lifted out of poverty thanks to an astonishing ten percent annual GDP growth rate, according to the World Bank. Over the past ten years alone, the percentage of people living in absolute poverty (living on less than $1.90 per day), dropped by 40% to around ten percent. With it, adult literacy rates have risen to almost 98% from 94% a decade ago, and life expectancy has been extended by 1.7 years.

Anyone trying to explain the resilience of the communist regime in China cannot underestimate these material and wellbeing improvements. Three in four Chinese citizens are satisfied with their living standards, a disproportionately high number given the country’s lower middle income status. Indeed, China has risen to match the OECD average in Economic Quality and substantially narrowed the gap in the Education and Health sub-indexes. This upward trend is likely to endure, as continued poverty alleviation and educational improvement are both prioritised in the country’s latest Five-Year-Plan. Comprehensive healthcare system reform is also high on the policy agenda.

China’s growth sprint has, however, created unwanted trade-offs. Most notable is the bottom 15 performance in the Environment and Social Capital sub-indices. Environment protection has been sacrificed on the altar of economic growth at a local administration level. Local officials are incentivised and rewarded based on GDP performance. The result of this has been the world’s second highest PM 2.5 exposure and a lack of attention on species preservation. Fortunately, the situation is changing. The increasingly evident deterioration and a surge in public dissatisfaction have nudged the government into pushing environmental protection up the agenda.

Low levels of Social Capital are another cause for concern. The Chinese are less prone and able to voice their opinions to public officials, meaning that linking social capital is weak. However, rapid economic growth has had a fundamental effect on Chinese society. The traditional Confucian value system based on family life and community ties is under great pressure from the impact of cultural globalisation and the emergence of individualism among the younger generation. Fewer Chinese feel that they can rely on relatives or friends when they are in trouble compared to 10 years ago. Rapid urbanisation and mass internal migration has forced many people away from their home towns and their support networks. A resulting sense of insecurity is clear: only 24 percent say they helped a stranger in the past 12 months, 16 percentage points less than a decade ago. Despite a financially more comfortable life, Chinese society is not particularly active in charitable activities – volunteering and donation rates are both among the lowest in the Index.

However, it is predominantly poor performance in the Governance and Personal Freedom sub-indices that separates China from its more prosperous East Asian neighbours. Progress in political reform has been slow; competitive elections are still confined to village and urban community level. Since assuming power, President Xi Jinping has downplayed the significance of collective leadership and has taken on more power and responsibilities. Government effectiveness has been enhanced as a result, but policymaking transparency and judicial independence that had previously been improving, are in decline once again. The anti-corruption campaign, one of the most determined and popular policy under Xi’s leadership, has successfully exposed and curbed official misbehaviour, but has so far failed to implement any institutional adjustments.

The government’s restriction of personal freedom has been rising. The vaguely defined ban on “improper discussion of policies of the central government” chilled both officials and ordinary citizens alike; state media has been told to act according to the party’s instructions and restrictions on private media have increased; online censorship deletes comments deemed to undermine public order; and restrictions on religious issues have intensified as crosses were removed from church tops due to “safety concerns”. On top of government restrictions, the status of social tolerance is also worrying in China. Attitudes towards ethnic minorities, immigrants, and LGBT groups are all less favourable than the world’s average level and have barely improved over the last ten years. All these account for China’s further decline to become the 11th worst performer in Personal Freedom across the globe.

Unbalanced prosperity development drags China behind in East Asia
Unbalanced prosperity development drags China behind in East Asia

As the divide between ongoing economic and human capital progress, and problems in Personal Freedom and Governance grows, domestic and international attention is increasingly cast on Xi’s second term, starting next year. President Xi will face fewer threats from party veterans after a large-scale reshuffle in the leadership group. Whether he is a determined reformer or a power-driven autocrat will likely be revealed, together with the destiny of China’s quest for a prosperous society.


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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.