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OECD Reviews of Regulatory Reform: China 2009

Defining the Boundary between the Market and the State

image of OECD Reviews of Regulatory Reform: China 2009

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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Regulatory Governance

Across the OECD area, the liberalisation of domestic markets and international trade, coupled with the introduction of regulatory management tools, has led to a profound reformulation of the state’s role in the economy. A similar trend has emerged in the People’s Republic of China since the late 1990s. Even if the process remains in its early stages, there is still evidence that the central government has begun to construct a fledgling regulatory system that gives policy makers new tools to impose and enforce economic regulation. This chapter describes how China has gradually developed capabilities for setting economic regulation and thereby guiding market dynamics through regulatory agencies, commissions and administrative procedures that nevertheless maintain an arm’s-length relationship between state and market. The aim of this chapter is to promote discussion on the development of regulatory governance in China and the relevance of regulatory approaches adopted by OECD countries. It raises a wide range of issues that deserve further thought in determining regulatory options for China.

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