"Undoubtedly China was the world's most dynamic economy and also a beacon guiding a gloomy world economy suffering greatly from the global credit crunch last year. The recovery of China's economy injected a lot of confidence into countries around the world, and accelerated recovery," says William Adams, an economist with Conference Board. 

As for China's economic recovery in 2009, William Adams offered high praise, sharing the common opinion of many international institutions and economists.

As the whiz kid of the "2009 international economy," China fulfilled a target of 8-percent economic growth with resolute and proactive fiscal policies, which won and will win confidence from overseas countries in 2009 and in years to come.

Shadowed by the financial crisis, China managed to win the 2009 dash and, in coming days, is prepared to win the more important victory of the long-distance race.

Almost every step correct

People noticed the news: "The rise of China's economy" was the most eye-catching headline during the past decade, surpassing the war in Iraq, the "September 11" terrorist attack as well as the financial tsunami," according to analysis and statistics of U.S. media monitoring institutions.

Merrill Lynch economist Lu Ting said every move in the Chinese economy affected global economic growth. For example, the Purchase Management Index (PMI) in China, which no one paid attention to during past decades, is now attracting worldwide notice.

"I heard praise from many international customers recently that almost every step China has taken was correct," said Tao Dong, Credit Suisse Chief Regional Economist. He said few overseas clients had praised the Chinese economy so highly in the past.

Todd C. Lee, Managing Director of the Greater China Division of the Country Intelligence Group, said the performance of the Chinese economy was perfect in 2009 despite harsh conditions, particularly considering the country's high dependence on exports. All the same, global exports shrank sharply last year and for China it was the hardest year in terms of exports since the reform and opening up policy was adopted in the late 1970s.

"The recovery of the Chinese economy played a vital role in preventing the international downturn from worsening. Global investors and credit institutions would have needed more time to combat the slowdown if China had not achieved an early recovery," Lee said.

"I believe China's GDP growth rate in 2010 won't be lower than 8 percent, which will be far higher than other major economies," said Zhao Huainan, assistant professor at London's Cass Business School. He said China's economic performance in 2009 again proved the Chinese Government's ability to control its economic development at critical moments.

The biggest challenge is not "growth"

"China's economic growth has greatly withstood the global economic slowdown, which is a piece of good news for Asian countries," said Stephen S. Roach, a senior executive with Morgan Stanley, who has been following the development of China's economy for years with great interest. However, the outspoken Roach also warned that it was not time for China to lose their heads about their successes so far.

Like Roach, who has been in China for a long time and has a deep understanding of the Chinese economy, Lee said that with the improvement in domestic and international environments, China's economy would perhaps once again be the best. But there are also challenges for China. How does China avoid a sudden halting of economic recovery when the Central Government gradually removes the stimulus package? How does China prevent a bubble in capital markets? "

GDP growth is a surface thing, and China should pay more attention to its quality, efficiency and sustainability, which are the key points to competing with other countries. China has won the battle of economic recovery, and the next step should be the expansion of domestic demand."

Analysts all indicate the biggest challenge facing the Chinese economy in 2010 is to promote the economic balance that was interrupted by financial turmoil, or rather, the transformation of its economic growth model.

As far as economist Ma Jun is concerned, in 2010, the Chinese economy's biggest challenges will be inflation and asset bubbles, rather than pushing forward growth. Loans growth being limited to 25 percent, instead of 30 percent, would be more suitable.

As for the "sequel" to China's market rescue plan, Tao Dong has a simple understanding. "Maybe fire fighters have put out the blaze but meanwhile the house is submerged. How to squeeze the bubble out and at the same time ensure the economy and financial sector stay stable is the big consideration."  

Look out for asset bubbles

Like some other emerging economies that are doing better in the areas of basic economics, China is also faced with asset price bubbles caused by overly active internal and external liquidity and the possibility of inflation. However, most international economists say they believe inflation of a substantial economy is unlikely to pose a big threat and what needs to be paid more attention to is the inflation of asset prices.

Qu Hongbin, a researcher at Hong Kong Shanghai Banking Corporation Ltd.(HSBC), says that if no action is taken to cool off overly fast investment, China will risk asset price bubbles in 2010. After all, China and other new emerging markets will continue to see increases in  inflow capital. Qu says China should try to slow down investment growth by cutting government input in local infrastructure construction, at the same time, increasing investment in social infrastructure such as education and health to lay a basic foundation for future consumption growth.

Todd C. Lee said although overestimation of China's stock market was no longer as serious as it was in 2007, it has to be remembered that the economic situation and prospects then were much better than they are today.

The biggest worry is overly loose monetary policy because, at any time, if a country's banks' loans within six months exceed a two year total, then decision makers must become more cautious. This is what happened to China in the first half of 2009.

When it comes to liquidity and inflation, an important problem is policy retreating, especially monetary policy. William Adams says that he believes China's monetary policy is partly supposed to keep pace with US Federal Reserve movements. China is stronger in its economic recovery trend than the United States, so if China follows US monetary policy, greater inflation would be expected in China, especially asset price inflation.

As for fiscal policy, it is widely recognized by experts that China's economic stimulus policy will not cease until 2011. Adams and other experts believe that in the first half of 2010, several months' economic recession might follow in the wake of economic growth and, in that case, the stimulus policy might be further strengthened.

"A great company will try to rebuild itself after it reached its peak, which should be the case with a great economy. This round of financial turmoil has happened to wake China up to rebuild itself." Roach concluded in his latest report: "I'm optimistic that China will seize this opportunity."