In response to a rise in activity in the housing market and an acceleration in inflation during the second half of 2010, the government started to tighten policy. Further tightening is likely in 2011, as the authorities try to maintain steady economic growth while keeping inflationary pressures in check. Fiscal policy will continue to exert a drag on growth, as the central government's traditionally conservative fiscal instincts reassert themselves amid an effort to address the risks associated with the recent surge in local-government debt.

Distortions in the economy will remain a major policy challenge in 2011-15. Growth will continue to rely on unsustainably high rates of investment, despite policies designed to boost consumption. The government will look to moderate increasing social inequality; an important CCP policy meeting in October 2010 stressed the need to raise incomes and "reasonably adjust income distribution". Officials may support workers' efforts to secure pay rises, and could seek to use the tax system more effectively to redistribute wealth. But state welfare services will remain underdeveloped, and efforts to increase expenditure in this area will make slow progress. The strong policy support provided to the state sector during the 2008-09 economic slowdown will diminish in the next couple of years, but the public sector will continue to enjoy preferential treatment, for example in terms of access to credit.