The new normal: China's holistic development of its economy moves beyond long-time focus on GDP

China has grown rapidly for more than a quarter of a century by following a strategy of high investment, strong export orientation and resource-intensive manufacturing. While this growth has lifted hundreds of millions out of poverty, it has also increased income disparity through unbalanced growth, environmental degradation (including air, water and soil pollution), corruption and unsustainably high local government debt.

In May last year in Henan , President Xi Jinping used the term "new normal" for economic development. This is a development strategy not based on gross domestic product growth alone, but includes economic, political, cultural, social and environmental development. The strategy is now playing out in China's economy, with the shift in the balance of growth from export-driven, heavy industrial investment towards domestic consumption. This shift is particularly evident in the services sector, with an emphasis on innovation.

China's economic growth has slowed, due to an ageing population, a decreasing rural workforce and more rigid energy, resources and environmental constraints. The expected growth rate in 2015 is below 7 per cent, with the rates for 2016-2020 expected to be around 6.5 per cent, and those for 2021-2025 around 5.7 per cent.

However, we need to remind ourselves that 7 per cent growth in 2015 is equivalent to a 14 per cent growth rate in 2007.

The key to sustainable growth in China is financial, fiscal, and administrative and social reforms.

First, China must continue to loosen control over interest rates and cross-border capital flows with full rate liberalisation as the ultimate objective. The People's Bank of China has made great progress by implementing a deposit insurance system and freeing domestic interest rates. However, China's financial system remains bank-dominated, with development in the bond and securities market lagging behind. Truly risk-based, market-driven corporate bond and securities markets will certainly enhance the efficiency of the financial markets in the allocation of capital.

The calibrated opening of the capital account - through the qualified foreign institutional investor scheme, the renminbi qualified foreign institutional investor scheme and the qualified domestic institutional investor scheme, plus the Shanghai-Hong Kong stock connect - were good moves but more needs to be done. The drive for renminbi internationalisation for trade and investment must continue for its eventual recognition as a convertible currency in the International Monetary Fund's special drawing rights basket, which is of symbolic significance.