Some of these institutions are now being probed, but careful analysis is necessary to help them cope with trouble and reduce chances of an economic upheaval.

Local governments may be asked to offer aid in the form of asset replacements, stock transfers and legal backing. Some cities may also be directed to issue program debt in order to raise funds for infrastructure needs.

Third, the real estate market needs guidance as well as adjustments.

During the past few months, China has reined in housing prices so as to enable affordable homes for all. This has achieved the desired result. Countering speculative activity and accelerating the construction of government-subsidized housing, especially at the local government level, must be encouraged.

Increasing capital gains tax may be an effective short-term measure to curb speculative realty purchases. The property tax issue must also be properly reviewed.

Fourth, efforts must be made to internationalize the renminbi.

Some countries are now facing either a sovereign debt crisis or are at high risk of doing so. These nations need debt quickly.

China could, in exchange for stakes in natural assets, invest or lend to these nations in dollars. At the same time, it can encourage them to trade with us using the yuan as a settlement currency.

The global influence of the renminbi can be widened by overseas investments, trade financing and other related measures.

The last, but no less important point, is about capital.

The global recession deeply influenced our economic development mode. In the coming years, expanding domestic consumption will be key to transforming that development model and ensuring stable economic growth.

Long-term systemic reforms, in the areas of income distribution, personal income tax rates and urbanization, are needed. These require regulation of private capital. By encouraging citizens to invest their surplus funds, gaps in funding for infrastructure projects can be plugged.

Concurrently, reform of state-owned capital must be deepened. While the state can retain control of strategic sectors, surplus shares may be sold to the public in order to meet social security funding needs.

The economy will be vibrant only when residents earn higher wages and consume more.

The above macro-control measures may help promote a virtuous domestic investment-consumption circle, thereby aiding in the smooth transformation of the national economy.

The author is director of the finance institute at the Development Research Center of the State Council.