New age, new balance and new breakthroughs

China's biggest annual political event, the National People's Congress (NPC), came to an end last week. Signs show that China is transitioning to a new model. For instance, for the first time in past 25 years, its GDP growth rate has fallen below 7 percent; the excessive production capacity may cause big problems in employment; the housing price is unbearably high for most people; the debt is twice of its GDP; the old way of using government investment to stimulate economic growth has had much less marginal benefits.

For such a huge country, its transition to a new economic model is especially difficult. This year's NPC passed a new five-year economic plan and Premier Li Keqiang hosted a press conference. These events give us hints about where this ancient country can adapt itself to a new age.

People in different sectors need clear information from the government. The stock market fluctuated wildly in the previous year and the beginning of this year, which was partly due to investors' extreme opinions about this huge economy's future.

However, the key points of the NPC and the Premier Li's conference can be summarized in two ways: New balance and new breakthrough.

It is easy to understand that if the economy could smoothly transit to a sustainable growth model, it needs to balance the old model with the new model, which Premier Li emphasized repeatedly in the press conference.

First, the government will avoid a hard landing.

Premier Li said the transition is difficult, but he stressed that hope is much bigger than difficulties and if China sticks to the reform and opening-up policy, it will avoid a hard landing. Premier Li's answer shows that China's government has realized the difficulty of transition and is actively working on it and the main paths are reform and opening up.

While many experts worry about housing price and total debt, the fact is that China is big enough to make space to solve the problem and the government has enough assets to deal with bad loans. China's service sector and massive application of modern science and technology equipped with improvement of legal system and property right registration and protection can foster new and fast growing industries, such as advanced manufacturing, e-business, prosperous service industry and the profits and employment of these sectors can help avoiding a hard landing.

Second, the government will solve problems of excess capacity and laid-off workers.

Premier Li said that there are some industries that have serious problems of excess capacity and the government has already chosen steel and coal sectors as important breakthroughs to solve the problem. The central government has set up a special fund of 100 billion yuan to help laid-off workers and the fund can be increased in case of need and the local governments will match their funds, too.