By Yu Bin &Wu Zhenyu, Department of Macroeconomic Research, DRC

GDP statistics show that China's economic downward pressure has been mounting in recent years. However, affected by weak investment motivation in the private sector, the government's short-term stimulating policies failed to reach evident outcomes. In response to this, the academic circles have shifted their concern from foreign demand shocks posed by the international financial crisis to researches on potential changes of domestic growth rates, gradually had in hand the objective laws governing economic growth at different stages, and came to recognize that economic development has entered the state of new normal. Policy focus has also turned from the demand side to equally on both demand and supply sides, more efforts have been gradually made in reform, progress has been made steadily in streamlining administration and delegating power to lower levels, and innovation and startups are witnessing a swift progress.

In analysis of economic operation, it is necessary to identify short-term fluctuations and transformational changes, distinguish primary and secondary factors, and, more importantly, differentiate drivers and key points for changes. For instance, value-added of final consumption and the service sector account for much higher proportion in GDP, mainly because of the growth decline in investment and industry rather than accelerated consumption and tertiary industry development. For another example, in reviewing China's adjustment process in the economic field after the outbreak of financial crisis, we will find that four crucial transformational changes have played a key role and serve as the dominant factors causing constant economic growth decline: 1. The number of working-age population has been reduced, exerting a fundamental influence on supply and demand; 2. The real estate market has adjusted its development trend, affecting the economic structure and industrial development; 3. Local governments are debt-ridden, undermining their capability for further investment; and 4. Global trade growth rate decline has spelled China's large fall in exports, impacting production and investment.