The bottoming out of China's economy is caused by two reasons. For one thing, given that the government has put stabilizing economic growth on the schedule in the fourth quarter of 2011, economic growth, based on previous experience, is expected to stop dwindling by the end of the fourth quarter this year. The other is spontaneous forces of the market such as inventory adjustment. Inventory growth has significantly decelerated. Progressing more rapidly in fully competitive sectors, liquidating inventories to a certain degree will spur the economy to bottom out.

It is more likely that the economic growth rate will rebound in the fourth quarter. GDP growth has been speeding up on a quarter-on-quarter basis. Since structural adjustment featuring capacity reduction has yet to be complete, the economy would level off or rebound slightly if priority is given to restructuring rather than a new round of stimulus. Economic growth is expected to rest at 7.6-7.7 percent this year, and climb to 8 percent next year. But in the middle and long term, the macro-economy has not gone through a substantial change, and capacity reduction won't stop until a new economic growth point is found.

Cyclical factors coupled with structural factors gave rise to the current economic slowdown. As the post-crisis recovery is much more fragile than the world originally expected, countries have unveiled an array of policies, such as the three rounds of quantitative easing policies launched by the United States. To realize a sustainable recovery, it seems inevitable to solve the structural problems accumulated in the previous economic cycles. But fiscal and monetary policies alone are not enough to complete structural adjustment, for both are short-term policies.

To seek a new economic growth point, the pressing needs now are structural tax reduction and dissolving monopolies. Structural tax reduction aims to reduce enterprises' burden to gain recovery and boost their investment in scientific and technical innovation, which means redistributing profits between the government and enterprises. Moreover, anti-monopoly measures are indispensable. The market economy itself tends to generate monopolies, not to mention some countries' tendency to encourage monopolies, which are mostly administrative. Monopoly always smothers innovation. In history, some monopolies even deliberately delayed the application of new techniques in production in order to protect old ones. Under competitive circumstances, technological innovation may lead to destructive innovation and generate new products and technology, evolving into a profit-growth engine. The government should be held responsible to establish rules and create a favorable environment for fair play.

Structural adjustment is viable only when major breakthroughs happen in technical innovation, from which new growth points will arise. Five years have passed since the outbreak of the global financial crisis; however, innovative industries like information technology, which has won extensive recognition across the world, have yet to take shape. By now, countries have selected a number of industries that are believed to have huge potential as a driver of economic growth. Nevertheless, history has told us that just one industry will be enough to help complete the restructuring.

At the current stage, the major task for China is to find out its new industry through competition and technological innovation.

This is an edited excerpt of an interview with Fan Jianping, chief economist of the State Information Center, by Securities Times