BEIJING, July. 24 -- Chinese economy has bottomed out and, aided by a slew of stimulus policies and measures, is now recovering, according to the latest statistics.

    In recent months, the situation has changed for the better, be it in the country's economic growth data or its economic confidence. But we should still be on guard against the uncertainties ahead and some of the problems underlying the economic performance amid the current economic turndown.

    The key problem is: Can the fledging recovery of the national economy maintain its momentum? There is also the question of whether the country's short-term efforts for promoting growth would cause trouble in the future.

    To resolve these issues, China should continue to hold on to its proactive fiscal and moderately loose monetary policy in an effort to keep its macroeconomic measures stable and sustainable. At the same time, it should also make some changes to its macroeconomic policy, such as shifting the country's focus from promoting economic growth to promoting sustainable development.

    That the national economy has bottomed out is reflected in the country's tangible second-quarterly economic growth and a robust rebound in domestic demand. The regained economic indices and confidence have reached a point where the slowdown of the Chinese economy is over.

    Nevertheless, we should be well aware that the latest economic rebound mainly stems from the government's strong stimulus packages. The external demand environment on which the export-fueled Chinese economy has long depended has not fundamentally improved. Also, insufficiency in domestic demand will be a drag on sustaining growth.

    The environment facing domestic small- and medium-sized enterprises has so far not improved, and their prospects remain gloomy. Besides, enterprise confidence has failed to gain ground, and the army of migrant workers and college graduates is still confronted with the harsh reality of unemployment. Despite robust investment by the government, non-governmental investment has not been reactivated.

    All these suggest that the policies and measures unveiled should be reinforced to give a push to the much-needed industrial restructuring for sustainable growth. The long-established extensive economic growth model and the long-delayed structural adjustment have proved to be key elements afflicting China's economic development.

    In the 4 trillion-yuan ($586 billion) stimulus package and the subsequent plans for rejuvenating the country's 10 major industries, industrial restructuring has been put on a par with preserving national economic growth and spurring domestic demand.

    To promote sustainable development, measures should be taken to avoid the unilateral expansion of government-led investment. From the medium- and long-term perspective, the 4 trillion yuan stimulus package will have a far-reaching flung impact on the country's efforts towards structural adjustment and sustainable development.

    However, excessive reliance on investment will lead to a rapid expansion of credit. This, in turn, will fuel excess fluidity and the bubbles that come with it, all of which can create uncertainties in the future. Also, in the government-led investment campaign, it is difficult to guarantee efficiency and boost the enthusiasm required for non-governmental investment.

    Without the participation of non-governmental investors, it is out of the question for China to sustain its economic growth. Therefore, the country should pay enough attention on how to spur soft non-governmental investment while considering how to boost investment.

    To keep up the pace of development, concrete measures to increase slackened domestic consumption are also needed. Due to a series of consumption-boosting measures in recent months, there has been a rebound in domestic consumption. However, people's income level and their income expectations are a key determinant of domestic demand expansion. The country should consider how to raise people's income while mapping out macroeconomic policies for the later half of this year.

    Relevant government departments should, without further loss of time, work out viable measures to push forward the country's income distribution reform. The government should further transfer its revenues to public finance. It should further lower taxes, including individual income taxes. Also, the permanent residence limitation in small- and medium-sized cities should be suspended to pave the way for migrant workers with the means to settle down. This will help accelerate the country's urbanization process, spur consumption and raise the people's quality of life.

    Moreover, practical measures should be taken for encouraging people to invest in the real economy other than in the real estate industry and other capital markets. To this end, the government should take a series of steps to motivate people to start new businesses, thereby increasing the flow of non-governmental capital to the real economy.

(Source: China Daily)