Looking ahead at China's economy: major challenges facing China's policy-makers

2009 can be considered the year when the Chinese economy showed its mettle... with a powerful recovery that helped lead the world out of recession. However, the battle is far from over. What are the major challenges facing China's policy-makers as they look into the future?

2009 was a year of number ones for China... as it surged ahead to become the world's top exporter and the biggest auto market. Its GDP realized the target growth rate of 8 percent. And it's expected to do even better in 2010.

The World Bank has forecast 9 percent GDP growth for China this year, while the International Monetary Fund has also made a projection of 10 percent.

Reporter Deng Wei said, "Over the past year, China's stimulus measures have greatly boosted the country's economic recovery. To ensure this continues, the country has vowed to maintain stability and continuity in its macro-economic policies in 2010. But the challenge is how to make the growth more sustainable and balanced."

Chinese Premier Wen Jiabao has warned during an online chat with the public that 2010 will be a year of great complexity for the nation's economy. Economists are echoing the sentiment, saying this year will see a period of adjustment.

Zhang Zhigang, Deputy Director, CPPCC Economic Committee, said, "Macro policies this year will focus more on the quality and effectiveness of economic growth. The emphasis is on balanced growth and adjustment of economic structure.”

While controlling inflation is widely seen as another challenge for the Chinese government, given early signs even now of asset price bubbles.

Pier Carlo Padoan, Chief economist, Org. of Economic Cooperation & Dev’t, said, "One reason is internal. That is the fact that the stimulus package has fueled liquidity. Another reason is that there is inflow of capital from rest of the world into China. This has put pressures on housing prices and equity prices."

Economists are also calling on more efforts to ensure a bigger role for market forces well as funding for small companies, while also minimizing income gaps. They say that while growth is a certainty in China, any expansion should proceed at a reasonable pace.