China’s top priority in 2019 must be financial reform, which is necessary if the economy is going to join the ranks of high-income countries by 2022, according to a report published by Li Daokui, a professor at Tsinghua University School of Economics and Management, Sina Finance reported.

The report said China’s economy has begun a new round of adjustment, which is marked by a lack of confidence among private and small companies, as well as slowing GDP growth, since the middle of 2018.

The report states that excessive tightening in the financial sector is the main reason why China must make adjustments. Since the fourth quarter of 2017, policies such as the “new asset management regulations” have substantially curbed entrusted loan and trust loan financing, resulting in a decline in social financing.

On the one hand, fiscal tightening has led to a rapid decline in infrastructure investment, and on the other hand, it has led to financing difficulties for private and small enterprises, which in turn has had a negative impact on the overall macro economy, the report said.

This differs from the perception that the trade war with the US, the aging population, rising business operation costs, the low efficiency of state-owned enterprises, and the lack of new growth momentum are the chief reasons why the Chinese economy has been under increasing downward pressure since mid-2018.