Overregulation and protectionism can only do harm to the recovering global economy, the global chairman of Pricewaterhouse Coopers said Wednesday.

Dennis Nally told Xinhua during an interview on the sidelines of the World Economic Forum that CEOs from around the world are concerned with overregulation of financial systems that "could somehow restrict our ability to invest" and with protectionist policies that restrict free trade.

"We're in a period today which I think is better than a year ago but no one is saying that we're out of the woods yet," Nally said in Davos, where top business and government figures are gathering for the annual forum.

Nally said that global CEOs are now more confident of future growth than a few months ago, but remain cautious when looking at the issues of employment and investment and actions from a management standpoint.

According to a new survey published by PwC, 81 percent of CEOs worldwide are confident of the prospects for the next 12 months, while 18 percent said they remain pessimistic.

In comparison, 64 percent of CEOs said they were confident of growth a year ago while 35 percent were pessimistic.

Still, there is a striking difference in confidence levels among CEOs in emerging economies and those in developed countries. In North America and Western Europe, about 80 percent of the CEOs said they were confident of growths in 2010. That compared with 91 percent in Latin America and China, and 97 percent in India, according to the PwC survey.

Nobody disagrees with the fundamental belief that governments need to improve their regulation of financial systems, Nally said. But, he said, there is the complex question of how to make the improvements.

"We need to fix the right types of changes ... and we should not overreact or rush to short-term actions that may sound good or may grab headlines but quite frankly would not serve the fundamental problems all of us need to address," he said.

Nally stressed that central banks, the Group of 20 influential economies and other different regulators around the world need to continue their dialogue and discussion on the "terribly complicated issue" of regulation.

During the interview, Nally also expressed optimism about China's growth prospects, despite the overall volatility of the global situation.

"Without question it (China) is a very dynamic marketplace, and the potential is just outstanding," he said. "The changes that are taking place in China are nothing short of phenomenal and they will be a leading power in the world in the years to come."