China’s economy is expected to grow by 6.6 to 6.8 percent in 2016, with the consumer price index (CPI) projected to increase by 2.1 percent, according to a recent blue book on the 2016 economy published by the Chinese Academy of Social Sciences (CASS).

Li Yang, director of the Academic Division of Economics at CASS, pointed out that the world has not fundamentally recovered from the global economic crisis.

He said there has not been a significant improvement in the key indicators of the crisis. The leverage ratio and unemployment rate remain high while labor productivity is on the decline and financial deficits are on the rise, Li said.

The domestic economic situation is rather complicated, Li noted, warning of a grim outlook for 2016 and the entire 13th Five-Year Plan period (2016-2020).

“However, we should realize that the Chinese economy has entered a comprehensive, self-driven development path, and only this path can steer China clear of the middle-income trap,” Li said.

Undeniably, there are obstacles looming in the process of economic transformation, which requires the support of social policy. It is therefore necessary to build an effective and sustainable social security network, Li said.

“All in all, we should be optimistic about the future development of the Chinese economy and brace ourselves fully for possible challenges ahead,” he added.

The blue book forecasts that China’s economy will grow by a reasonable margin in 2016. Employment and prices will be basically stable and there will be no hard landing, according to the report.

At present, the Chinese economy is under mounting downward pressure. In this scenario, the blue book suggested adopting proactive fiscal policy.

Currently, “stabilizing growth and increasing benefits” should be prioritized in proactive fiscal policy to enhance its direct effect on demand expansion. More government investments are needed to maximize the leading role of financing in infrastructure investment and its driving role in private investment, according to the blue book.