The CCP is in a strange position. They are nominally Communist, but they've largely jettisoned its economic prescriptions (because they don't work). They're a one-party state (more or less dictatorial depending on your viewpoint).
So they're in power but don't have Marxism to really fall back to as an ideology. They're also unable to rally people around a religion like Iran.
Their best bet to remain in power are thus:
Really badly managed, a la Venezuela, they'd have to use considerable coercion to remain in power. With their level of success in delivering material improvements, by encouraging nationalism, and by limiting access to information, they can convince most (Han) people, most of the time, to avoid making waves to get rid of the CCP.
That's also a big part of the reason Xi's reign started off with a big anti-corruption drive, again you want to remove reasons for political resentment (another is that it allowed Xi to sideline his political rivals).
So the incentive for them to manage competently is to avoid repeats of events like Tiananmen. When that fails to work, there's always the fallback to more coercive methods - ask Tibetans or Uighurs - but competence or its appearance is a big part of their appeal.
On the international stage, assuming they want China to be a world power - and remember, "selling" China's success to the Chinese people is also in their game plan - they also have every incentive to manage their economy and technology as efficiently as possible. Prevailing against the US and Western democracies requires that, as the USSR found out to its detriment.
China's leadership is reportedly extremely sensitive to the outcome of Perestroika in the USSR and wants no repeat of it but also know they can't compete by autarky or using military means alone.
If you assume that the CCP leadership are not just in it to steal from the state (unlike say Papa Doc in Haiti or Marcos in the Philippines), then other motivations come into play. They may either want to be admired as leaders, they want their political system to succeed or they have a vision for the country. In that case, running the country competently, if it is in their capacity seems better than just running it into the ground.
Plenty of dictators desire success at some level, not just lining their own pockets. Ceaușescu or Mussolini for example. Doesn't mean it's pleasant to live under them. Or that they run things well.
China is also starting out with considerable advantages, being a huge market and country, with a tradition of education and of looking up to central government (as well as a miserable period in the early 20th century without a functioning central government). The same methods, used in a different country with a smaller economic potential, less homogenous population or a different culture, may not work as well.
As far as Covid goes, they have managed it rather well. If Western countries had the power to impose mass quarantines on short notice or throw people in jail for not following medical guidance (and if we had uniformly competent political leadership wrt medical issues), I'm sure we'd be doing better too.
Thing is, when Covid's over, we will be as we usually are, but China will still be a dictatorship.