Academics recently called for vigilance against latent risks in economic development, such as “industry hollowing,” in order to create a favorable market environment and cement the foundation for the real economy.

The State Council emphasized improving the environment for the real economy on April 5 while identifying key tasks for economic restructuring in 2017.

Invigorating the real economy has become a crucial issue. During the Two Sessions in early March, Chinese Premier Li Keqiang mentioned “real economy” seven times in his government work report, setting the tone for economic work in the near future.

At present, the virtual economy is burgeoning in China, but it lacks the backing of a solid real economy, said Zhang Hui, a professor of economics at Peking University.

Zhang pointed out the need to consolidate the base of the real economy, propel its restructuring and constantly improve its quality, benefits and competitiveness, thereby building a strong material groundwork for China to sidestep the middle-income trap.

Liu Xiaoxin, director of the Research Center for Virtual Economy and Management at Nankai University, voiced the same concern. “The virtual economy alone is not sufficient to sustain economic growth, so we should ensure coordinated development of the real and virtual economy.”

The virtual economy is largely funded by the real economy and the price of virtual assets is dependent on the profit created by the real economy, Liu said. If the virtual economy develops separately from the real economy, it will swell spontaneously and finally result in the bursting of virtual asset price bubbles, triggering a financial crisis.

It is therefore important to maximize the potential of the virtual economy in effective resource allocation and direct production factors to the real economy to realize industrial transformation and upgrading.

The principle of the virtual economy serving the real economy cannot be allowed to change. Geng Qiang, a professor from the Business School at Nanjing University, said that the capital market is pivotal to the investment and financing service chain of the real economy. It not only supports domestic demand expansion, but also meets the needs of economic growth and restructuring, serving as an indispensable basis for multichannel financing in the real economy, Geng said.

Consolidating the real economy base and preventing the economy from derailing to the virtual track is a task vital to China’s supply-side structural reform. In this regard, scholars suggested rationally laying out the real and virtual economy and develop them simultaneously to increase the rate of capital return of the real economy while reducing the rate on the virtual side.