Last year in the Chinese academia, there had been industrial policy debates that attracted a lot of attention. The core of the debate revolves in whether the government should intervene in economic development through industrial policy. We believe that the development of Japan's industrial policy can be a reference for China. Japan's industrial policy emphasizes on the adjustment of industrial structure, including protection of domestic products, developing strategic industries and establishing market-oriented policy system to manage the economy. However, oil and aircraft manufacturing and other industries in Japan experienced failures even before the implementation of such policies. This gives China a valuable lesson, that it is unrealistic not to have any industrial policy, yet it is completely impossible for China to develop a number of competitive industries in the world just by relying on industrial policy. Therefore, concerning the industrial policy issue, China's policy focus should be on utilizing market-oriented reforms to improve the efficiency of economic resource allocations.