Since the beginning of 2019, many issues have been simmering in the global financial markets, some even triggering lopsided opinions focusing on the short-term performance of the economy. In view of this, it is important to shift the focus toward prevention of risks. For this, there are several key issues that need to be pondered.

First, issues relating to the global economy and China's economic cycle have been misinterpreted.

The global economy is experiencing a phase of relatively stable growth across the board. In particular, its growth rate is above 3 percent, showing stable and sound momentum mainly driven by economic restructuring, technologies and innovation.

As a significant player in the global economic landscape, the United States saw its economy grow at a strong rate of 2.9 percent for all of 2018, which is good news for both the country and the world.

However, concerns about the global economy, especially rising unease caused by trade frictions have impacted global productivity and the import- export trade, which will inevitably disrupt the recovery and upward momentum of the global economy.

In effect, the future of the global economy is not all doom and gloom for it is too early to be pessimistic about economic momentum after only two months of this year, considering the economic growth cycle.

In addition, China’s gross domestic product exceeded 90 trillion yuan ($13.4 trillion) in 2018, though there have been questions about whether the indicators reflect the country’s actual economic growth after panic due to the economic slowdown in the fourth quarter of 2018.

In this regard, it should be noted that the slowdown can be attributed to China’s ongoing economic restructuring valuing high-quality development more than high-speed growth.

A lack of understanding may hinder China’s economic growth and adjustments and even dampen market confidence on the economic outlook. Therefore, it is significant to understand the country’s economic cycle, forms, structures and prospects more accurately.

Currently, China is experiencing a new phase of economic restructuring and revitalization of the real economy in the cycle, with a long way to go .

Beyond confidence about the economic outlook, the global stock markets not only reflect the economic fundamentals and prospects but can also influence market confidence and sentiment of the participants greatly.

The performance of the stock markets have received much attention mainly from two perspectives. First, a gloomy market sentiment prevailed after the United States stock markets continued to fall and even plummeted in the fourth quarter of 2018. However, the fact is that the market has risen steadily in 2019 and seen an unprecedented strong beginning in the past two months. Second, China's stock market has been influenced by the rise of the global stock markets, including the US market and the advancement of its technological cycles, and close attention needs to be paid to the influence of foreign capital on China’s stock markets.

As China takes the initiative to open its capital markets, the potential role of foreign capital in the current rise of its stock market also calls for attention .

Although short-term capital return and the acceleration of market conversion have indeed stimulated the stock market, the focus should be on whether it is conducive to the long-term health of the domestic stock market.

News reports show that global investment funds have begun to invest in emerging markets, which are mainly Asian countries.

Since the beginning of 2019, the purchase of Chinese stocks by overseas investors has reached 99 billion yuan ($14.7 billion), significantly exceeding that of 2018.

This came after Morgan Stanley Capital International announced the improved share of China's A-shares in the MSCI index from 5 percent to 20 percent through three steps.

Meanwhile, according to China Securities Journal, foreign capital has been accelerating its purchases of China’s stocks and guiding the transformation of market trends and investment styles in recent months, moving faster into its A-share market. The reason foreign investors are buying dips in the market is that the country is easing control on foreign exchange.

Still, the development of China’s stock market needs to be in line with the real economy, for a stock market without support from real-economy industries can be exposed to risks and industry-based cycles are difficult to sustain.

Notably, speculation in the stock market will definitely cause extreme results.

A stock market is a barometer of a country’s economy, which can only to counter risks with sophisticated mechanisms, systems, experience and technologies.

Since foreign capital is generally strongly supported by technologies and experience, China need to further identify and prevent risks without rush.

At present, market public opinion is focused on short-term operations and dynamics, especially on the US issue.

Pessimism sparked by US government actions, concerns about the country’s economy, its retreat from several leagues and an interest rate hike promoted by the Federal Reserve mainly focus on short-term influences, while the actual results are better than expected.

For example, the US economy saw sound performances last year compared with the previous years. And concerns about the government’s actions last year have also proven to be an overreaction, for the US economy performed better than projected, improving by 2.9 percent for all of 2018.

In the fourth quarter of 2018, the US economy grew by 2.6 percent, higher than the expected figure of 2.2 percent. The performance has not only shown the resilience of the US economy but also indicated the distinctive strength of its modernization.

Since US interest rates are no longer key in the world, the long-term goal of the Fed’s interest rates hike is to restore its power. Looking at the current US interest rates, the goal is far from being achieved, which can lead the Fed to continue the hikes and seek opportunities to improve their frequency. In particular, the current US economic cycle can fully support the Fed to raise interest rates.

In addition, withdrawal of the United States from multilateral organizations is also having an effect. However, multilateral cooperation has clearly continued amid globalization, in which the most prominent case is the North American Free Trade Zone with unchanged modes.

The year of 2019 is expected to see a complicated global situation, as major countries strive to launch strategic goals and seize opportunities. So, lack of understanding of the overall landscape can lead to ignorance of the reality, and inappropriate countermeasures will cause great risks. Therefore, China needs to focus on managing, judging and coping with risks as well as promoting development and reforms with tangible efforts through minimizing losses and maximizing progress.

Tan Yaling is dean of the China Foreign Investment Research Institute.