China’s influential marketisation index declines, sparking calls for reforms

Chinese economists have called for more pro-market reforms to tackle economic imbalances and vicious intra-industry competition, as a new report has revealed a decline in a major index tracking the country’s marketisation.

In a new assessment from the National Economic Research Institute, a Beijing-based think tank, China’s overall level of marketisation – measured by five criteria, including government-market relations – stood at 5.62 out of 10 in 2023, slipping by 0.1 from 2019 and by 0.4 from 2021, the index’s four-year peak.

The index, typically published every two years, is one of the country’s most influential non-governmental benchmarks. The institute has tracked China’s level of marketisation and business environment through government data and surveys for decades, with a change to its baseline year for measurement in 2019.

Speaking at an online forum late last month, Wang Xiaolu – the institute’s deputy director and a lead researcher – called it a “pretty significant change”, and said action should be taken to reverse the trend.

While the Covid-19 pandemic caused some distortions, Wang said, it also saw the state play a smaller role in economic policy in some cases and cannot be said to be the main reason for the decline.

Out of the five subindexes the institute measures, government-market relations – the proportion of resources allocated by the market and reduction of government intervention in enterprises – saw the biggest deterioration since 2019, with a drop of 0.38.

South China Morning Post