How fast will China grow over the next five years?

But potential growth is just one part of the story. Whether it can be achieved depends on domestic conditions and the international environment. In order to exploit its latecomer advantage, China must deepen its reforms and eliminate its economy's residual distortions. Meanwhile, the government should play a proactive role in overcoming the market failures - such as externalities and coordination problems - that are certain to accompany technological innovation and industrial upgrading.

China has the potential to maintain robust growth by relying on domestic demand - and not only household consumption. The country suffers no lack of investment opportunities, with significant scope for industrial upgrading and plenty of potential for improvement in urban infrastructure, public housing and environmental management.

Moreover, China's investment resources are abundant. Combined central and local government debt amounts to less than 50 percent of GDP - low by international standards. Meanwhile, private savings in China amount to nearly 50 percent of GDP, and the country's foreign exchange reserves have reached $4 trillion. Even under comparatively unfavorable external conditions, China can rely on investment to create jobs in the short term; and as the number of jobs grows, so will consumption.

The external scenario, however, is gloomier. Though developed countries' authorities intervened strongly in the aftermath of the global financial crisis in 2008, launching significant fiscal and monetary stimulus measures, many of their structural shortcomings remain unresolved. "Abenomics" in Japan has yet to yield results, and the European Central Bank is following in the footsteps of America and Japan, pursuing quantitative easing in an effort to shore up demand.

Employment in the US is growing, but the rate of workforce participation remains subdued and the economy has yet to attain the 6 to 7 percent growth rates usually recorded in a post-recession rebound. The US, Europe, and Japan are likely to experience continued sluggish performance, inhibiting China's export growth.

As a result, Chinese growth is likely to fall below its potential of 8 percent a year. As policymakers plan for the next five years, they should set China's growth targets at 7 to 7.5 percent, adjusting them within that range as changes in the international climate dictate. Such a growth target can help to stabilize employment, lower financial risks, and achieve the country's goal of doubling incomes by 2020.

Justin Yifu Lin, a former chief economist and senior vice-president at the World Bank, is professor and honorary dean of the National School of Development, Peking University.