China's increasing policy flexibility will help stabilization and reform amid the continuing slowdown, Morgan Stanley said on Monday.

The leading global investment bank expects the policy loosening to help the world's second largest economy to stabilize growth and pave the way for the furthering reform, according to its latest research note.

Helen Qiao, chief Greater China economist of Morgan Stanley, said the Chinese economy stands a good chance to bottom-up in the second half of next year despite the downward trend, thanks to more flexible economic policies.

China's economic fine-tuning measures were more flexible this year, ranging from targeted RRR cut, lowering interest rates and the relaxation of household mortgage policies.

Morgan Stanley expects similar measures will continue to roll out in 2015, including lowering funding costs, supporting infrastructure investment selectively and stabilizing housing demand.

The note predicted Chinese economic growth will slow to 7 percent year on year in 2015, 0.1 percentage point down from its previous estimate, given "the weaker-than-expected fixed asset investment growth in recent months, especially in property development."

The latest official data showed China's property investment growth continued to slide, with leading indicators such as new starts and land sales weakening further.

Qiao said China will face growth headwinds such as sluggish property investment growth and lingering high fund costs in the next year.

The forecast of Morgan Stanley was echoed by many other financial institutions and think tanks of the government, which generally gave out estimated growth at or slightly above 7 percent.

The Research Bureau of the People's Bank of China, the central bank, projected the growth at 7.1 percent in 2015, dragged down by weaker property sector which will offset rising exports. The Chinese Academy of Social Sciences and the Bank of China made similar predictions.

The official full-year growth target for 2015 will be released during the annual "Two Session" in March.

The note also forecast the growth of China's consumption at 6.8 percent, exports at 5 percent and imports at 2.6 percent on a year-on-year basis in 2015. The country's consumer price index (CPI) rise will remain at low level of around 2 percent.

The Central Economic Work Conference, a crucial economic meeting of policy makers which finished last week, said China will strive to keep economic growth and policies steady in 2015 and adapt to the "new normal" of slower speed but higher quality.

The conference reiterated the proactive fiscal policy and prudent monetary policy.

Qiao gave an optimistic forecast of China's economic outlook in the long run, estimating GDP growth at 7.3 percent in 2016 when the reform measures are expected to gather steam with more dividends unleashed.

China's economy expanded 7.3 percent year on year in the third quarter, the lowest reading since 2009 and marking looming downside pressures.