Sustaining High Growth

Second, the new government is focused on strengthening the social security net as a pillar of a modern consumer society. In particular, owing to the hukou, China's antiquated household registration system, access to public services and benefits are not portable. As a result, migrant workers, an underclass numbering roughly 160 million, remain shut out of government-supported healthcare, education and social security.

Holes in the social security net have led to high and rising levels of precautionary saving, driving a wedge between increases in income and any impetus to discretionary purchasing power. Significantly, there were strong hints from senior Chinese leaders at the forum that hukou reform is now under active consideration. While that would be welcome, such efforts need to be accompanied by an expansion of benefits. China's retirement system has only about US$430 billion of assets under management (national and local government social security and private-sector pensions).

Third, and possibly most important, is the quality of China's new leaders. From President Xi Jinping and Premier Li Keqiang on down, China's new leadership team is quite sophisticated in terms of analytics, risk assessment, scenario modeling, and devising innovative solutions to tough problems.

Moreover, under the organizational umbrella of the National Development and Reform Commission, the latter-day version of the old central planning apparatus, China has marshaled considerable resources into the formulation of a comprehensive and well-thought-out economic strategy.

However, it will take more than strong policy and analytical skills to deal with the tough economic challenges that lie ahead, as has been repeatedly demonstrated in the West in recent years, and there are no guarantees that China's newly installed leaders will avoid comparable pitfalls.

Vision and strategy are vital, but it will take courage and determination to tackle what is perhaps the biggest obstacle of all to any new growth strategy resistance from deeply entrenched local and provincial power blocs. To overcome these, strong words must be accompanied by bold action.