New year brings hopes, challenges for new normal China

When setting the growth target for 2015, China's Guangxi Zhuang Autonomous Region made it clear two mindsets should be avoided: one is the blind pursuit of expansion, the other allowing the economy go under on the pretext of a "new normal".

The region's statement highlights the complex task China is facing in the "new normal" era of slower growth -- knowing when to stand by and let the economy moderate and when to interfere to avoid a sharp slowdown that could threaten jobs and social stability.

In 2014, guided by the "new normal" theory, the leadership has managed to strike a balance. The economy has generally stayed on a reasonable track despite some hobbles, and a broad range of reforms necessary for the long-term sustainable growth are enjoying smooth progress.

The long list of achievements include the abolition of registered capital requirements for new firms, which caused growth in new company registrations, a landmark opening of capital accounts via the Shanghai-Hong Kong stock connect scheme, which permits investors in the two financial hubs to put money directly in each others' stock markets. The publication of set of draft rules on deposit insurance will pave the way for implementation next year and the issuance of long-awaited rules for a nationwide property-registration system could help control speculation in the market and aid anti-graft drive.

According to a statement issued after a meeting of China's central leading group for comprehensively deepening reform on Tuesday, 80 key reform tasks identified for 2014 had been "basically finished" in addition to the completion of 108 missions assigned to various central departments.

Helped in part by these efforts, some pleasant signs have already started to emerge across the economy.

A recent national survey showed a more competitive manufacturing sector that has begun to grow out of its reputation for low costs and low added value, and a service sector that started to play a bigger role in the economy with a surge in firms and jobs.

Meanwhile, China's job market has proved resilient despite slowing economic growth, with more than 13 million new jobs expected to be created this year.

Although some traditional sectors are struggling, China's young entrepreneurs are driving a wave of startups that has become a bright spot for the economic landscape and an important engine for future growth.

But the past year is just the start of a long, arduous journey. For China to successfully ride out the "new normal" age, a lot more efforts aimed at deepening reforms, fostering creative innovation and improving market efficiency are in need, and Chinese leaders are well aware of the challenges.

In the tone-setting economic conference in December, Chinese leaders stressed the economy still faces many challenges and "relatively big" downward pressures such as increasing difficulties for businesses and the emergence of economic risks.

The statement did not give a specific growth target for 2015, which is usually made public in March, but said the government will be "reasonable" when setting up goals and maintaining the flexibility of its macro-control policies.

The statement targeted nine areas for focused reform efforts for 2015 -- the capital market, market access for private banks, administrative approval process, investment, pricing, monopolies, franchising, government purchasing and outbound investment.

Many of these reforms -- privatizing the financial sector, streamlining administrative approvals, and encouraging investment -- are being experimented with in the Shanghai Free Trade Zone. The country has planned new free trade zones in Tianjin, Guangdong and Fujian, a crucial step in taking these reforms to the next level.

China also vowed to speed up reform of its state-owned enterprises (SOEs). It has unveiled a reform plan in August for the payment packages of top executives at SOEs, part of a broader plan to reform the inefficient state sector by attracting private investment and hiring more qualified professionals to manage the firms in an increasingly market-based economy.

All combined, these reforms, though some are set to be met with vehement resistance from different interest groups, will help foster new momentum for the new normal China.

Looking ahead 2015, Mckinsey director Gordon Orr said it seemed harder to give predictions as the political and economic leaders in China have clear plans and supporting policies that they are sticking to.

"You can debate the pace at which actions are being taken, but not really the direction in which the country is travelling," he said.