Uncertainties in the external market have been increasing, including the COVID-19 pandemic, overprinting of currencies in major economies, drastic fluctuations of global commodities and ongoing global inflation.

But at the same time, China's total factor productivity is relatively low. The indicator has seen its growth rate contracting since 2008 to register 1.25 percent at present－only 40 percent of the United States level and 43 percent of that in Germany. When China is scheduled to realize modernization by 2035, the country's total factor productivity should grow at 2.7 percent annually. If China can maintain its GDP growth rate at around 5 percent in the next 15 years, the 2.7 percent growth rate indicates that total factor productivity should contribute 54 percent to GDP growth, which is a difficult target to attain.

The constraints on resources and the environment should also be considered. While China has recorded noticeable import and export data for years, its past economic development model cannot be sustained in light of increasingly tighter environmental constraints. A transformation toward green and low-carbon development is urgent.

Meanwhile, technology and industrial reforms have been taking place with each passing day. China should seize opportunities in ever-evolving industries and take the lead in technological reforms, which are China's responsibilities as a world major economy.

On top of that, China faces a huge task of seeking inclusive development.

The population is aging. The latest data showed that the population of people aged above 60 reached 264 million in China in 2020, which was 18.7 percent of the country's total population. China's graying demographic will be even more acute by 2035.

Although China has eliminated absolute poverty, there are more complicated issues to deal with when the country aims to address relative poverty, including education, healthcare and culture. There is still a long way to go for China to realize common prosperity.

It is only through reform, opening-up and innovation that China can address the above challenges. China, as the world's largest single market, should have its vitality stimulated to the full and its attractiveness to global capital further enhanced. It is through high-quality development that China can cope with all the external uncertainties.

Development in the financial sector should be the focal point regarding the following deepened reform measures. It will not only stimulate innovation but also escalate the country's opening-up.

In the first place, a currency anchor should be established for the renminbi. The issuance of the renminbi is now anchored to the US dollar to some extent, which is due to some historical reasons. But given China's international status and development demand, such correlation should not last long.

A country's currency should be anchored to the performance of its own GDP and the credit of its own treasury bonds. Only in this way can it have its own authority and authenticity. It is only with an independent currency anchor that China can have its own treasury bond yield curve and a truly independent currency policy. A benchmark can be thus developed for the pricing of all financial assets in the country. There is an urgent need to address this problem given the increasing complexity of the global marketplace.

Second, financial institutions and policies should better serve the real economy. The lowering growth rate of total factor productivity and its lower contribution to GDP growth can be largely attributed to the mismatch of various market factors, especially financial mismatches. The real estate industry has expanded so rapidly that soaring housing prices have hijacked the Chinese economy. A large amount of capital, together with bank loans, has poured into the housing market in a disorderly fashion, and problems have emerged.

Under such circumstances, we should think about what kind of financial system should be built to prioritize the central authorities' ground rule of "housing is for living in, not for speculation".

Meanwhile, average incomes in the financial industry are several times that of in manufacturing. Listed financial companies account for more than half of the income made by all the A-share companies. The central government has stressed that manufacturing should take up a bigger share in the A-share market, which requires a repositioning of the financial industry to support the high-quality development of manufacturing.

Third, green finance should be developed based on China's own development pace. On the one hand, green finance has developed so rapidly that the introduction of related accreditation systems and standards for carbon reduction has not kept pace.

On the other, China's resource endowment－which has long been dependent on coal consumption－points to the fact that China cannot eliminate all its coal-fired power facilities overnight.

Transformation will take time. Even when China realizes its carbon peak and emission goals, coal power will still serve as an important supplement. During this process, financial departments should not be too timid about coal consumption but rather come up with a financing mechanism that can serve China's green transformation. It not only caters to China's development demand but also that of many developing countries.

Fourth, financing for targeted small and medium-sized tech companies should develop at a faster pace. A large number of angel investors and venture capitalists have emerged in China. But most of them still lack the discerning eye for truly advanced technologies and innovative unicorn companies. These domestic investors usually follow suit when major overseas institutions have already invested in a certain company. Such investment habits have resulted in repetitive construction and competition at a lower level.

When consumption-based internet companies started to emerge, international leaders made huge investments in these industry leaders. We are now equally hopeful and concerned when it comes to the possibility of domestic investment institutions seizing opportunities in digital economy and green economy.

Last but not least, financing should better serve the goal of common prosperity. One important way to narrow the income gap is to help people better acquire property income. Even for ordinary employees, we should provide them with more investment channels to boost their incomes.

For example, annuities can be developed as a major pillar for the pension fund system. Companies should be allowed to invest annuities in the capital market. Employees will be able to see their assets grow while the capital market will be injected with continued long-term capital. There are plenty of other options that deserve more research.

The views don't necessarily reflect those of China Daily.

The writer is a distinguished professor at Fudan University and former mayor of Chongqing.