The Chinese economy is currently experiencing "double dysfunctions" of both the government and the market. It is in a situation similar to a maze, where the economy is trapped. Walking out of the plight will require the Chinese government to overcome market limitations in shaping what is called the "super-market" market economy.

READ: Analysis on the current Chinese macro-economy (Part I)

Reforming China's economic system, credit system and financial system are inevitable choices for the Chinese government. Reforms will raise financial efficiency, improve credit symmetry, strengthen supply management, intensify the flexibility of the monetary supply and increase input into the real economy and effective supply while squeezing out improper spending.

It will be difficult for China to change its economic system and privatize its state assets. But China has to reshape its credit system, before restructuring its finance and raising financial efficiency. In reshaping its credit system, China should create a fair, effective and well structured financial ecosystem, securitize assets (their right of use and earning power), and gradually reform property rights.

The capital market possesses advantages and functions unfound in banks with regard to credit reshaping in China and in terms of supporting real economy. Securitization can help a business with financing on the right of use and earning power of its assets.

Financial reconstruction will be a bridge between the financial markets and the real economy to ensure high efficiency and low risk. In doing so, the government needs to reform gradually and rely on the Internet for better economic management.

Six dividends currently exist in the Chinese market, namely the dividends of institutions, science and technology, the labor force, resources, internationalization and ecology.

China should form an economic theoretical system with Chinese characteristics, one that is in line with its own political and economic institutions and is based on China's successful experiences without excessive championing Western economic theories.

On the economic front, China should continue to seek the unity of the market, society and nature. With the precondition of respecting market rules, social rules and natural rules, China should improve its top-level design and macro management.

This process will help form better economic theoretical and technological systems, theories that are inclusive enough to guide China's economic practice.

The writer is a researcher with the Finance Research Institute of the People's Bank of China.

The article was translated by Chen Boyuan. Its original and unabridged version was published in Chinese.

Opinion articles reflect the views of their authors only, and not necessarily those of China.org.cn.

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