The annual Central Economic Work Conference aims to lay out the policy framework for next year. This year's annual meeting, which opened on Friday, is of particular significance because it comes after the Fifth Plenum unveiled details of the 13th Five-Year Plan (2016-20), which is expected to mark a new start for China's development.
There is no doubt that maintaining a proper growth rate is still a top priority for China, but the economy suffers from an unbalanced structure and there are many so-called zombie companies - firms that somehow remain open even after years of losses - affecting the country's economic system.
With GDP per capita having reached $7,485 last year, China is now in a development period that could either mark the beginning of a new era of higher-quality development or that could see China fall into the middle-income trap. With the benefits from China's WTO entry and industrial transformation as well as its population dividend diminishing, the economy could become increasingly fragile unless a way can be found to promote endogenous growth and keep a balance between economic growth and social development.
Based on international experience, it is almost inevitable for countries in an economic take-off period to suffer from a widening income gap and unbalanced development. China's Gini coefficient - a measure of income inequality, in which zero is ideal equality and 1 represents extreme inequality - stood at 0.469 in 2014. China has become one of the countries that suffer from income polarization. The most urgent issue facing China's economy is perhaps not to kick-start a series of reforms to inject vitality into the economy but to develop an upgraded and more efficient growth model.
Whether China focuses on demand-side reform or supply-side reform, the most important thing is to achieve the strategic goal of China's economic transition. Over the next 10 years, the country's average annual growth may drop to only 6 percent or even 5 percent, but there is nothing to worry about if it is efficient growth. What China needs to do urgently is to improve productivity as it seeks to weed out outdated production capacity. It should also strive to develop a new economic growth model through industrial restructuring, technological progress and improvement of human capital. Only by doing this can China successfully avoid falling into the middle-income trap.
The author Zhang Yugui is dean of the School of Economics & Finance at Shanghai International Studies University.
