Concern over cyclical challenges grows

In economic policy, as in most other areas, actions speak louder than words. By cutting its benchmark policy interest rates, the People's Bank of China, the central bank, has underscored the tactical focus of the government's stabilization policy, which aims to put a floor of around 7 percent on GDP growth.

Achieving this goal will be no small feat. China's economy is facing structural headwinds arising from the shift to a new model of services- and consumer-led growth, and cyclical pressure, as a tough global environment puts downward pressure on the old export and investment-led model.

The cyclical challenges, in particular, are proving to be more severe than anticipated. Though exports have declined considerably from their pre-crisis peak of 35 percent of GDP, they continue to account for about 24 percent, leaving China exposed to the global growth cycle - especially to markets in the developed world, where demand is exceptionally weak.