Massive reforms, balanced approach

During the past year, Premier Li and President Xi Jinping began to push a huge reform agenda of tripartite reforms, core sectors, and packages. The triple reforms cover the market, government and corporations. In view of the Work Report, the basic approach is now in place.

The goal is to recalibrate and reduce the government's role in the economy. In particular, more private capital will be injected into state-owned enterprise sectors.

Nonetheless, Li called for a "balanced" rather than a "prudent" monetary policy. The subtle shift indicates that, in adverse conditions, the government is prepared to loosen credit, if needed. While such moves could ensure a short-term boost to the economy, they could also contribute to added credit challenges of local governments.

Nonetheless, this does not mean that China intends to inject more risk into the financial system. Rather, the effort with a "balanced" approach suggests that the government wants to retain its strategic maneuverability.

"We will take investment as the key to maintaining stable economic growth," Premier Li said. In the medium term, however, the goal is a gradual shift from investments and net exports to consumption-driven growth.

The core sectors of the ongoing reforms include finance, taxation, state assets, social welfare, land, foreign investment, innovation and good governance. Indeed, China is moving ahead with fiscal reforms, promising to further overhaul the exchange rate, interest rate, and fiscal system.

Further, the government hopes to promote the establishment of small and medium-sized banks using private capital and to set up a bank deposit-insurance system. Similarly, Premier Li pledged that the renminbi's daily float range will be widened, which has been widely expected in the market after the recent steep depreciation of the yuan.

These reforms are contested but vital to allow China to end its reliance on the fixed asset investment that still drives growth and has contributed to the volatility in the property markets.

What does it all mean from the standpoint of the Chinese dream?