After years of rapid expansion, the Chinese economy will now be tested by new challenges ahead, asking a number of tough questions.

What is the best way to realize sustained long-term growth when resources are becoming limited? What is the best way to tackle employment pressure and other social issues? And what is the best way to narrow the gap in regional development?

Such questions, which are common concerns for experts and officials, are also the key factors that will decide whether the Chinese economy will continue to boom and how it can achieve a soft landing.

In spite of a staggering 9.1 percent growth rate last year, the Chinese economy has been so far largely driven by high investment input and big consumption of resources, while economic efficiency and the recycling of resources have remained very low, said State Development and Reform Commission Minister Ma Kai.

Such an extensive model of economic development has to be changed to realize sustained growth. Otherwise, the Chinese economy may lose momentum or even encounter big fluctuations, he said during the China Development Forum 2004 in Beijing Sunday.

"We have to adopt a scientific development ideology and try to build an efficient national economic system," he said.

That requires deeper economic restructuring, readjustment of the government's functions and exertion of the market mechanism.

For example, the traditional model of industrial development, which is more labour- and resource-intensive, should be upgraded, with an expected boom of more technology-based and service businesses coming soon.

Ma said that authorities are also brewing reforms on financial, fiscal and investment systems and the price formation scheme to make them fit better into the environment of the market economy.

The State Council is also drafting a document to promote development of the private economy, which will give the private sector further stimulation, he said, declining to elaborate further.

The Chinese economy is at a crossroads now. It is the right time to propose sustained economic growth and a people-oriented development ideology which can help solve existing problems, said State Council Development and Research Centre Director Wang Mengkui.

He said the major issues to tackle in the near future include the rural economy, unbalanced regional development, employment pressures and other social issues as well as resource-saving and environmental protection while the economy is on the fast-growth track.

Dwight Perkins, director of the Asia Center of Harvard University, said that capital and personnel inflows are the major factors that affect regional development.

Experts expected that more labour would be moved from low value-added sectors, such as agriculture, to sectors with better economic returns, like manufacturing.

Regarding near-term trends for the Chinese economy, it has been predicted that growth will slow down mildly this year as Chinese authorities take measures to control lending and investment in sectors with signs of overheating.

Stephen Roach, chief economist at Morgan Stanley, said the slowing economic growth in China will be reflected in the easing growth of bank lending, exports, industrial output and consumer price indices.

(China Daily March 22, 2004)