Despite being faced with a complicated international context in 2018, China's economy as a whole has remained stable and progressive. There are several landmark economic indicators to show this: its GDP exceeded 90 trillion yuan ($13.40 trillion) for the first time; its per capita income reached $10,000 for the first time; the volume of foreign trade exceeded 30 trillion yuan for the first time; and its foreign exchange reserves remained above $3 trillion. These achievements were hard-won.

Last year, China's GDP grew by 6.6 percent, but it also showed a declining trend quarter by quarter. Even so, China has still contributed about 30 percent of the world's new GDP growth and remained the main engine of global economic growth.

China's economy has made steady progress and shown signs of improvement in five aspects. First, the economic growth rate was within a reasonable range. It is expected that China's GDP will grow by 6.3 percent this year and by more than 6 percent in 2020. So, it will be a high probability event for China to complete the building of a well-off society in all respects by 2020.

Second, inflation remains stable. The consumer price index grew by an average of 2.1 percent in 2018; and residents' income growth was roughly in line with economic growth.

Third, the employment situation is good, with 13 million urban jobs created for six consecutive years.

Fourth, the international balance of payments has reached basic equilibrium. The trade surplus has narrowed, and there has been no large-scale capital outflows. Both foreign direct investment and outward direct investment have maintained steady growth, and the renminbi exchange rate has remained relatively stable at a reasonable and balanced level.

Fifth, positive progress has been made in supply-side structural reform, the economic structure continues to be improved and the quality and efficiency of development is being raised. Also, the investment structure is being optimized with more investment in environmental protection and agriculture, increasing by 43 percent and 15.4 percent respectively in 2018.

However, China's economy also faces new challenges. World economic growth will slow in the coming years, and the economic policies of the United States, the European Union, and other major economies are full of uncertainties. With the prevalence of protectionism, populism, and unilateralism, the multilateral trading system with the World Trade Organization as the core and the global governance system are facing unprecedented challenges.

In 2018, China's foreign trade surplus hit a record low with only $350 billion and it will keep declining in the future.

With the increase in labor costs and the improvement of environmental protection standards, some low-end manufacturing industries have begun to migrate to neighboring countries. So, investment growth is also weak, and it is difficult to keep relying on expanding investment to drive economic growth.

Also, high housing prices in first-tier cities have squeezed consumer spending. The growth in traditional consumption, such as housing and automobiles, is weak, while the growth of emerging consumption, such as tourism, culture, information, pension, health, and sports consumption, while accelerating, still accounts for a low proportion.

The manufacturing industry is large but not strong, and the overall development level of science and technology is still low. Enterprises have significantly increased their investment in research and development in recent years. However, it still takes time to cultivate new drivers of economic development.

Although the bottom line of no systemic financial risks has been maintained, some local financial risks have inevitably emerged, such as the collapse of P2P lending platforms, corporate bond defaults and the volatility of the stock market, which have had a negative impact on the real economy.

Reform needs to be accelerated in key areas, especially reform of State-owned assets management and State-owned enterprises. The scope for mixed-ownership reform should be expanded, and monopolies need breaking to encourage competition. In this competitive field, private capital can gradually play a leading role.

Incentive mechanisms should be established for State-owned enterprises to mobilize the enthusiasm of entrepreneurs and workers.

Meanwhile, large financial institutions should realize strategic transformations; strengthen internal risk control and improve their risk pricing ability, so as to adapt to the trend of comprehensive operation of financial institutions and expand financial openness.

The development of private banks and other medium-and small-sized financial institutions should be encouraged. And under the premise of controllable risks, China can vigorously develop fin-tech, steadily promote asset securitization, reduce the cost of financial services, and improve the efficiency of financial services for the real economy.

The relationship between the central and local governments needs to be straightened out to establish a modern fiscal and tax system, and the relationship between the government and the market needs to be adjusted to reduce the cost of government operations.

However, in my opinion, the most promising place for China's economic development in the next decade is the rural-urban area.

China is gradually establishing a mechanism for the two-way and orderly flow of production factors between urban and rural areas; promoting integrated development between urban and rural areas; seeking rural revitalization, and pushing the construction of urban infrastructure. But, in particular, China should deepen reform of the land system; increase the application of new technology and improve the rural market system; and promote the transformation of agricultural development from small-scale farms based on families to modernized agriculture and promote the development of urbanization by fostering new industries and creating new employment opportunities.

With a large number of farmers turned into citizens, there is great potential for consumption growth.

The difficulties in the first quarter may be enormous, but China's economy is projected to stabilize in the second half of the year and it is expected to grow steadily in the future, with an annual economic growth rate between 6 percent and 6.5 percent.

The author is the deputy Chief Economist of the China Center for International Economic Exchanges. 

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

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