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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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Executive Summary

The transition to a market economy in the People’s Republic of China is among the great economic success stories of modern times. Since the beginning of economic reforms in 1978, real GDP growth has averaged almost 10% annually, a performance that compares favourably to that of the prior growth champions – Japan and Korea. China has become the world’s third largest economy, its number two exporter, and its leading manufacturer. Living standards of all segments of the population have risen markedly over the past three decades and poverty has fallen from over 50% at the beginning of reforms to below 10%. 

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