Since entering the World Trade Organization (WTO), the country has safely navigated through the transition period. Its foreign trade has boomed, the influx of foreign investment got in full swing, and its forex reserves are also swelling. Meanwhile, China is geared up toward going global and exploring the international market, reflected in its euphoric overseas investments.

On the financial frontier, the country's capital accounts are opened to the world. The reform of the renminbi exchange rate mechanism has been forging ahead since 2005, endowing the Chinese currency with greater resilience. All these have allowed greater breathing room for further development, but at the same time added difficulties to macro-economic controls.

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 Outdated systems stemming further development are yet to be removed.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.