The fourth change is pressing demand for sustainable development. Through 30 years of rapid progress, China has made considerable headway in economic aggregate and composite national strength. But some problems still loom large. For example, the imbalances between investment and consumption, and the disproportion among primary, secondary and tertiary industries remain to be tackled. Extensive economic growth mounts heavy pressures on resources, energy and the environment. Outdated systems stemming further development are yet to be removed. Besides this, dedicated efforts are still needed to improve the living conditions of the people.

New controlling moves

Appealing to changes of the general economic situation in recent years, China has employed adaptable measures to keep the macro-economy healthy.

Firstly, market instruments prevailed on the basis of flexible market systems. The macro-economic controls as of 2003 have largely been realized by economic and legal means, with administrative measures as assistance. A mix of multiple policies has been coordinated in use, including policies on taxation, land use, industries, foreign trade and foreign exchange. Meanwhile, market instruments have also been wielded, such as a basket of monetary policies on the reserve requirement ratio, interest rates, open-market operations and window guidance.

Secondly, a gradual approach has been taken in macro-economic controls so as not to make a dent on the potential growth rate. Positioned in the middle of urbanization and industrialization, China may see rises in its potential economic growth rate, but is also likely to undergo steeper fluctuations. The macro-controls are aimed at preventing an overheating economy, as well as a fallout. A step-by-step approach therefore should be deployed to shield market vitality.

Thirdly, macro-economic controls should take account of both internal and external factors. China has merged into the globe, compelling a macro-perspective to manage the economy.

The Chinese economy has its ingrained woes, such as bubbling investments in fixed assets, over-abundance of money supply and excessive trade surplus. These problems are actually related to the domestic economic pattern with aggregate savings exceeding aggregate investments. As a result, the economy has to rely on external demands to offset the deficient domestic demands. But with the trade surplus sizing up, the money supply would in tandem run rampant, fuelling excessive liquidity. Given that, domestic inflationary plagues would further aggravate, with asset prices creeping upward.

Macro-economic controls should therefore use both internal and external levers. For example, to soak up liquidity, the reserve requirement ratio and interest rates were raised. On the other hand, export rebates on energy-depleting, high-emission and resource-based products were abolished or slashed, so that the credit expansion could be curbed, trade surplus was trimmed and emission reduction encouraged.

Fourthly, the macro-economic controls are bent on sustainable development. In other words, the controls are blended with economic restructuring, growth mode updates, system reforms and improvements in people's living conditions.

Fresh challenges

In 2008, plaguing the Chinese economy are three fresh challenges.

The first is growing inflationary pressure. The Central Economic Work Conference held in December 2007 attached priority importance to warding off an overheating economy and evident inflation. This entails striking a balance between curing inflation sores and maintaining healthy economic growth with stable employment.

The second is shockwaves sent from international economic waters. For example, the simmering U.S. sub-prime mortgage meltdown may reverberate into world markets. Furthermore, spiraling prices for oil, grain and raw materials in the international markets have cast uncertainties over the future development of the Chinese economy.

The third is the sudden outbreak of massive natural disasters, such as the snowstorms that battered south China in late January and the May 12 Sichuan earthquake. They have added difficulties to macro-control efforts. Take the earthquake for instance. It serves as a dragging force, but also as propulsion to economic growth. Besides taking high death tolls, it wreaked havoc on the production and infrastructures in disaster areas. However, the relief efforts and post-quake rebuilding could widen consumption and investment demands.

In the present economic circle starting from 2000, China's economy has quickened at the pace of 8-11 percent for eight years in a row. This is an unprecedented record in the country's economic history. Due to the stringent tightening policies, the country's economic growth may slow down to around 10 percent this year. But that does not mean a turning point, as the future trend still needs time to express itself.