Staying the course on structural reforms

China's effort to rebalance its economy - transitioning from investment-to consumption-based growth, reducing air pollution and improving social services - has inevitably led to a "new normal" of slowing growth. While it is tempting to focus on short-term growth targets, Chinese policymakers may want to consider the benefits of staying the course on structural reforms, which could help the country sustain robust economic growth in the long run.

In recent years, China has carried out policies that have put the economy on a more sustainable footing at an impressive pace. The government, for example, has taken steps to rein in credit growth, enacted environmental legislation and reduced excess capacity in the economy. These measures have moderated economic growth, expected to come in at 7.4 percent this year and 7.2 percent in 2015, according to our (World Bank) most recent projections.

These growth rates are still consistent with the growth target for the 12th Five-Year Plan (2011-15) period and would be the envy of any other country. But for China, the current growth performance represents a paradigm shift relative to the high growth of the last 30 years which has helped China lift more than 500 million people out of poverty.

In an effort to sustain growth in the short-term at current levels, the government has taken actions aimed at boosting demand and short-term growth in sectors such as real estate. The central bank, for example, recently lowered interest rates on both deposits and loans, the first rate cut since the summer of 2012. The government also cut mortgage rates and relaxed lending standards.

The key to Beijing's continued success, we believe, will be the government's ability to strike a balance between achieving short-term targets and promoting longer-term, sustainable growth.