[By Jiao Haiyang/China.org.cn]

There is a popular saying that to fail to plan is to plan to fail. While China's economic growth over the last decade has been impressive, the country must continue to adapt to new global and national realities.

The 383 Plan drawn up by the State Council Research Development Council in advance of the third plenum of the 18th CPC Central Committee is a clear indication that China does not intend to fail in terms of economic reform. The Chinese government realizes that it must cut bureaucracy and red tape, create a service culture in government departments, fight corruption, and promote competition, especially in the banking and finance sectors and among state-owned enterprises.

Regulation by governments is a vital component of public and private sector governance. Regulation comes in many forms. It includes hard law (public laws and regulations enforced by the state) and soft laws (standards, codes of conduct, best practice guidelines, and so on). Regulation also involves licensing and the removal of licenses from those who violate their terms. It includes processes such as inspections and other forms of managing compliance and policing non-compliance.

Government regulations can promote competition, protect the environment, correct inequities, provide access to essential facilities, mitigate information asymmetries, and generally ensure a balance between the interests of the various stakeholders. Regulations may also seek to reinforce values such as predictability, transparency, the rule of law, fairness, efficiency, and social order.

Governments play a vital role in seeking a balance between pure competition focused on maximizing profits and the broader goal of ensuring that public interests are taken into account and advanced. For example, there are often inequities in information flows and there is a natural tendency to monopoly, especially where essential utilities and infrastructure are concerned. Government regulation should also be proactive in prohibiting free riding, for example when a private player uses public air and water to make profits, but does so at the expense of polluting valuable natural resources.

But regulation also comes with a cost and the challenge for governments in a global economy is to gain the benefits of regulation while reducing its costs and eliminating inefficiencies in the regulatory system. If one country can regulate its industries more efficiently than others, it gains a competitive advantage in terms of compliance, productive days lost, days lost in waiting for approvals etc.

In order for China to maintain its impressive economic growth, continued regulatory reform is required to meet new needs as they arise.