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Legatum Prosperity Index 2016
China
Ranked 90th of 149 on the 2016 Legatum Prosperity Index™
OVERVIEW
China’s economy remains robust and human capital is growing, but blighted
social capital, restricted personal freedom, and environment degradation drag
its prosperity down to 90th.
Despite living in one of the world’s fastest-growing economies, the Chinese still face
challenging trends in their daily life. Air pollution and destroyed forests have become part of
life; traditional family ties have been eroded by mass domestic migration and surging
individualism; and extensive restrictions on freedom, in real and virtual lives alike, have not
been loosened as the middle class grows. The list goes on but the Chinese have reasons to
be optimistic about their future. Apart from the Economic Quality, Safety & Security, and
Personal freedom sub-indices, progress has been made, if incrementally, in all areas since Xi
Jinping took the reins in 2012. Now all eyes are on his next move as his second term, and
theoretically the last, is approaching.
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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.
Legatum Prosperity Index 2016
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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”.
China’s prosperity gains have fallen behind its staggering economic growth
GDP per capita changes since 2007 in China, East Asia, and the BRICS
Legatum Prosperity Index 2016
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China’s prosperity gains have fallen behind its staggering economic growth
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 subindexes. 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
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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.
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Unbalanced prosperity development drags China behind in East Asia
With gaps nearly closed in Economic Quality, Health, and Education, dismal Governance and Personal Freedom constitute
the biggest hurdle to China’s catch-up
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.
Ways to make a change
Click on the Tweets to help make a change in your nation.
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Moral decay? How to rebuild social trust in China as economic development breaks
traditional family ties
Balance needed: time to address the disparate prosperity delivery that impedes China’s
future success
Poverty towards prosperity: can poverty alleviation and health gains hide discontent
with low freedom for much longer?
Visit China’s country profile on www.prosperity.com.
Legatum Prosperity Index 2016
www.prosperity.com