OECD Reviews of Regulatory Reform: China 2009

Defining the Boundary between the Market and the State

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China has made enormous progress in developing the modern legal and regulatory foundation for the market economy. The private sector is now the main driver of growth, and new laws have gone a long way toward establishing private property rights, competition, and mechanisms for entry and exit comparable to those of many OECD countries. At the same time important challenges remain, including further clarification of the scope of state ownership, reform of relations among central and local governments, firmer establishment of the rule of law, and strengthening of regulatory institutions and processes.


This review of China's regulatory system focuses on the overall economic context for regulatory reform, the government’s capacity to manage regulatory reform, competition policy and enforcement, and market openness. The review also examines the regulatory framework in the electricity, water and health care sectors. As for OECD countries, the review follows a multidisciplinary and highly interactive approach. A number of OECD instruments and policies are used in this assessment, although the review also takes into account the specific challenges faced by the Chinese authorities. The review includes a comprehensive set of policy recommendations.

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Enhancing Market Openness through Regulatory Reform

The People’s Republic of China is a large and rapidly growing economy that has benefited substantially from international trade and investment. Economic reforms beginning in 1978 under Deng Xiaoping have gradually introduced a market sector within a centrally planned economy, and leveraged international trade and investment to support this process. China’s piecemeal process of economic reform over the past thirty years has yielded significant results in economic growth and integration into the global economy. China’s accession to the WTO on 11 December 2001 symbolised its ongoing integration into the world economy by providing more secure and predictable market access both for China and its trading partners. WTO accession entailed obligations to implement a spectrum of reforms to broaden the adoption of market-based economic and trade policies. WTO obligations have been important to China not only in terms of locking in existing reforms, but in supporting domestic policymakers when advancing behind-theborder reforms to enhance the quality of existing market liberalisations. WTO obligations have and continue to underpin systemic institutional and regulatory reforms across the administrative bodies governing the Chinese economy. Domestic political conditions for further “second generation” trade-related reforms – tackling border and domestic regulatory barriers are becoming more difficult. Industrial policy interventions and restrictions on foreign investment have marginally increased in recent years. This chapter traces the path of China’s regulatory reform in the trade area. It pays special attention to the way in which rules are implemented. This report uses as its basic yardstick the six “efficient-regulation principles” developed by the OECD. The chapter concludes with a series of policy options which Chinese authorities should consider as they move toward a fully open and efficient trading system. 

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