Judging from current trends, economic growth next year may be more complicated than this year, said Xia Bin, director of the Financial Institute of the Development and Research Center of the State Council.

"The slowdown of China's economic expansion is not only associated with the growth base of last year, but it is the inevitable result of macroeconomic regulation and control initiated this year. The direction of the macroeconomic regulation and control should firmly be unchanged and the transformation in the economic development mode should be further advanced," he said during a recent interview with People's Daily.

China’s GDP growth rate in 2010 stood at almost 12 percent in the first quarter and over 10 percent in the second quarter. The signs of the moderation in the GDP growth have already emerged.

Xia suggested that China should firmly maintain the direction of economic regulation and control and adhere to the principles of “continuity, stability, flexibility and pertinence” put forward during the central economic working conference in 2009.

Three major policy variables are the main factors to help stabilize China’s economic situation in the near future -- real estate policies, policies on local governments' financing platforms and policies on restricting overproduction capacity and energy consumption, he said.

He explained that expanding the domestic demand is the key to ensure China’s stable economic growth in a certain period of time in the future.

"It is critical to begin the research on long-term institutional reforms as soon as possible when implementing short-term policies," Xia said.

The institutional reforms include the reform of the income distribution system, such as lifting the threshold for levying personal income tax and lowering the tax rates of the service industry. The reforms also include those involved with the development of urbanization, such as household registration, medical care and education of rural migrant workers as well as lowering the threshold for investments in the service industry in small and medium-sized cities.

He suggested the government should formulate and implement rules to boost private investment. The private funds will help alleviate the pressure on real estate speculator funds and reduce the pressure on the funding gap of local investment projects. Meanwhile, it will also fill the possible investment gap caused by the growth rate decline in real estate investments.

Second, we should accelerate the transformation of the economic development mode through activating and leveraging state-owned capital stocks, he said.

He said that China could appropriately enhance and expand the proportion and scope of asset dividends of central and local state-owned enterprises. Meanwhile, except for the stocks that still need to be maintained in an absolute or relative holding ratio, the remaining stocks should be sold to focus on speeding up the construction of the pension system.