A new batch of macroeconomic tools were key to curbing systemic financial risks and preventing an economic hard landing during the past year, experts said.

These tools included targeted tax reductions for small and micro businesses, and targeted monetary easing to support undeveloped sectors, instead of extensive and aggressive stimulus.

"It was the first time that the Chinese government's macroeconomic regulation focused on both growth stabilization and structural reforms," said Ma Jiantang, executive vice-president at the Chinese Academy of Governance. "Balancing the two targets will require more creative policies in the coming years."

Dealing with excess production brought by the past decade's credit-driven over-investment has become one of the toughest tasks for the government.

The central government has also increased controls on local government debt financing in order to curb a potential debt crisis.

Fiscal policy is likely to become more expansionary, said experts, with the budget deficit likely to exceed 3 percent of GDP in the next few years.

"The People's Bank of China subsequently chose to use other liquidity provisioning tools rather than the reserve ratio to manage liquidity and cover additional holiday cash demands, to avoid sending too strong of an easing signal or applying further downward pressure on short-term rates and thus the renminbi," said Wang Tao, chief economist in China at UBS AG.

Chinese GDP growth moderated to 6.9 percent in 2015, and supported a stable growth of job opportunities and income, although the rate hit a 25-year low.

The old path of simply boosting demand cannot solve long-term structural problems, so the top leaders are determined to reduce the misallocation of resources and increase productivity, while also boosting the supply side, according to Yang Weimin, deputy director of the Office of the Central Leading Group on Financial and Economic Affairs.

Ding Shuang, head of the Greater China Economic Research at Standard Chartered Bank (HK), said, "the government faces a tougher balancing act in 2016: cutting capacity and leverage while ensuring minimum growth of 6.5 percent to achieve a 'well-off society' by 2020."

"Over the next five years, we think growth will be prioritized whenever it risks falling below 6.5 percent, while capacity reduction and deleveraging will be the focus when the growth target is secure," said Ding.

A commentary in People's Daily said that macroeconomic policy should avoid aggressive short-term stimulus, given the sharp increase in leverage.

Instead, market-oriented reform should be deepened in key areas.

The policies should focus more on increasing job opportunities, stabilizing prices, readjusting industries structure, improving production efficiency, controlling risks and protecting the environment, it said.

"Policies could be more flexible as long as growth remains within a reasonable range," it said.

chenjia1@chinadaily.com.cn

(China Daily 02/03/2016 page5)