In this sense, adjustment of the economic structure in the global context means an upward movement toward a more profitable sector in the global labor division, which will be difficult to achieve in a short term.

The global financial crisis has only made China's situation worse. Prior to the crisis, developed countries, such as the United States and the EU countries, used to produce and export hi-tech products with high added value and import labor-intensive products, and China used to produce and export labor-intensive products. The crisis changed the old framework of supply and demand. People in Western countries began to alter their high-debt consumption mode toward less spending and more savings, which caused a decrease in imports of labor-intensive products from developing countries.

What's more, in an effort to balance their mammoth trade deficit, advanced countries spared no efforts to increase their exports of high technology products. On one hand, China has formed too large an export-oriented capacity for labor-intensive products, as its exports seem doomed to decrease as a result of sluggish demand from advanced countries. On the other hand, with hopes of increasing its international competitiveness, China has also built up its hi-tech and high value-added industries, which have also been brought under fierce international competition as a result of mounting export efforts from advanced countries. Meanwhile, emerging economies like India, Viet Nam, Indonesia and Honduras have begun exporting labor-intensive products to developed countries with even lower costs than China. In this sense, the outbreak of the global financial crisis made China's overcapacity even more serious than before.

Dealing with the current overcapacity prevailing in China and adjusting the economic structure successfully in a short period of time are the biggest problems confronting the country. One viable way would be technological innovation. It has been widely acknowledged that those who take the lead in technological innovation win. But technological innovation is never an easy undertaking. Whether it wants to admit it or not, China will not be able to produce an auto engine as good as Japan, Germany and the United States in a short period of time.

The Chinese economy has been largely propelled by investment in capital, labor force, land and resources rather than being based on technological innovation, which causes problems such as high energy consumption and serious pollution. Our current problems are lack of technological advancements, inadequate investment in research and development and an imperfect system environment.

The devastating world financial crisis destroyed the old balance of demand and supply. In the long run, advanced countries will decrease their consumption and increase their savings, and some other developing countries will take the place of China in the global trade framework. If it comes to fruition someday, China will face more and more serious domestic overcapacity problems.