Why sustaining China's 7.5% GDP in next 3 years is a 'herculean challenge'

Structural reforms needed in these areas.

According to DBS, normalization of economic growth to a sustainable level of around 7.5% in the next three years is a herculean challenge.

Here's more:

Absent short term conventional macroeconomic stimulus, growth potential will have to be harnessed from structural reforms in three key areas: (1) Financial/banking sector reform, (2) Fiscal reform and (3) Land reform. But reform takes time because it also requires corresponding institutional changes.

To compare, financial/banking sector reform could well be the low hanging fruit in such a complicated environment. The band widening of the CNY against the USD already happened. And the next in line could well be further liberalization of interest rates.

Indeed, PBOC governor, Zhou Xiaochuan, recently stated that the plan is to complete interest rate liberalization within two years.

Should this happen, competition for deposits will exert more upward pressure on interest rates, thereby widening the rate spread between CNY and USD (currently at about 2%), assuming US interest rates stay constant. This development will support the CNY exchange rate.