China’s spectacular economic expansion has continued in recent years, making for impressive improvements in living standards. The slowdown associated with the global financial and economic crisis was contained by massive fiscal and monetary policy stimulus, which has boosted domestic demand. While the current account surplus is shrinking, some macroeconomic imbalances remain, in particular in the form of a high national saving rate. A key adjustment will be to durably lower government saving. Ongoing social reforms can be expected to help in this respect, provided they are sufficiently funded by the central government. Rapid further urbanisation will require greater labour mobility. This calls for gradually phasing out the still rigid registration system and the attendant differences in social entitlements, notably as regards education, welfare assistance, pensions and health care. More accessible and better public services will also strengthen social cohesion. To sustain vigorous economic growth beyond the ongoing recovery, it will be important to further liberalise product and financial markets.