China's structural and cyclical slowdown; reforms remain key to maintain growth

The gradual slowdown over the last four years has been due to the potential growth rate grinding lower and cyclical pressure on the economy. That implies there is room to support potential growth with structural reforms and room to make countercyclical policy measures more effective. 

If proper initiatives were implemented, there could be further upside to the current growth level in the short term and long term. On the other hand, a further slide in potential growth and mismanagement of business cycles could result in downside risks to growth. 

It is believed that structural reforms and sector deregulation hold the key to increasing the potential growth rate to close to 7%. Policymakers will implement key structural reforms, including for fiscal, financial, state-owned enterprises, demographic, service, and other areas to increase efficiency and remove excess capacity gradually.