Since the talks in the late 1980s regarding China's accession to the WTO, policy reforms in China have targeted deregulation in the country's push towards market economy status. Over the decades, the Chinese government has eliminated or reduced regulations concerning price and market entry barriers in relation to trade in both goods and services. In one of its most recent acts, the Chinese government announced the removal of administrative approval procedures in certain sectors related to around 70 items. With this reform, China is sending out the strong and clear message to all that it will continue its push to move toward a more open market economy.

As we have learned from the experiences of developed economies, deregulation will lead to substantial productivity in affected economic sectors and contribute to a overall increase in productivity. China's own economic development in the past 30 years has also shown this to be the case. The Chinese government has shown its determination to continue with its open door policy and also demonstrated its strong belief that the Chinese economy will benefit from a more open and more market-oriented economic system.

If we examine America's experience with deregulation, the policy did not enjoy strong public support, either in an economic or political sense and it has always been a bipartisan issue. China's lesson from the U.S. experience is that deregulation improves overall economic efficiency and the benefits of deregulation exceeds the costs. There is a basic consensus inside China that if China is going to lead the world economy, it has no choice but to continue its efforts towards building a more open economy.

Needless to say today, China's economic development model is unique and although deregulation measures have been implemented, the Chinese government should also consider strategic measures to ensure that the country's rule-of-law system is maintained. More foreign businesses are now seeking to trade on a level playing field supported by a fair system based upon the rule of law. Deregulation does not strip the market of all its rules, but rather makes it transparent and fair for all. Therefore, to a large extent, deregulation requires reregulation. Deregulation can remove price controls, while reregulation should guarantee that inflation is kept under control and the threat of monopoly is avoid. Deregulation can get rid of government approval, while reregulation should recognize that strict controls are necessary in certain sensitive industries, banking and the financial markets.

Perhaps the new policy reform is just a move internally toward deregulation, but it may be a mistake to assume that deregulation is a panacea. Deregulation works well in "regulatory states" such as the U.S. because both federal and state governments tend to strengthen and expand statutory rules and regulations. As University of California political scientist David Vogel has argued: "Firms and economic actors do not only seek permissive regulatory environments but also want to ensure both stability and high standards of market behavior among counterparties and competitors, as well as a strong legal system to provide ex post sanctions for opportunistic or fraudulent behavior." Therefore, deregulation matters, but reregulation matter even more.

China is rising in a world which is very different compared to the one in which today's developed countries rose and any changes in China's economic policy can have immediate effects, both globally and internally. To promote marketization and a more open economy, China must do two things: Introduce deregulation in order to promote economic productivity through the liberalization of government procedures in capital and investment control and reregulate in order to guarantee a level playing field under the rule of law. In the long run, more pro-market reregulation is critical for China's future economic prosperity.

The author is a columnist with China.org.cn. For more information please visit: http://www.jhzsvip.com/opinion/zhanglijuan.htm

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