The Brookings Institution is a highly prestigious American think tank. Li Cheng is the first Chinese-American director in the century-long history of Brookings' John L. Thornton China Center. His research focuses on U.S.-China relations and Chinese politics, and his team brings together academic and political stars such as Kenneth Lieberthal. Regarding the ongoing Two Sessions in China, Li Cheng gave an exclusive interview to a 21st Century Business Herald reporter and shared his views.

21st Century Business Herald: Judging from the 2017 Government Work Report, Premier Li Keqiang set this year's GDP growth target at around 6.5% and stressed "striving for better results in actual work." This is slightly lower than last year's "13th Five-Year Plan" growth range of 6.5%-7% and the actually announced 2016 growth rate of 6.7%. How do you interpret this year's target?

Li Cheng: A cautious figure is better, and it leaves the Chinese government plenty of room. If conditions are good, the (economic growth) figure will be somewhat higher. In fact, China's economy has shown many improvements in many respects, especially in the service sector, whose (share) has already exceeded 51.5%—a remarkable change. At the same time, China's domestic demand is growing, and tourism is also growing. These are all signs that inspire confidence.

If domestic demand grows faster, the service sector remains strong, and innovation among newly graduated college students gains more momentum, the final (economic growth result for China this year) will be better than 6.5%.

We must understand the broader environment and be prepared for possible future shocks to the Chinese economy from the United States and the European Union. (The U.S. claim that it will impose) a 45% tariff on China is completely unreasonable and would also harm U.S. interests. Likewise, there are many unknown factors in Brexit and the elections in Germany and France, and these will be among the considerations for the Chinese government in formulating economic policy.

21st Century Business Herald: Judging from the key tasks for 2017 set out in the Government Work Report, how should this year's macroeconomic regulation handle the relationship between structural adjustment and stable growth?

Li Cheng: These two aspects complement each other. "Adjustment" and "stability" are two sides of the same issue; one cannot emphasize only one side while ignoring the other. Of course, China's economic adjustment is a long-term process. Now it is necessary to maintain stability while also maintaining a certain level of growth, and pressures from employment and population will be reflected. Under such circumstances, (policy) must constantly change as the situation evolves.

If urbanization becomes increasingly strong and environmental pollution is curbed at the same time, then growth and investment can be expected under such circumstances. But at the same time, if there is great pressure on environmental protection, plus the need to prevent local debt problems, prevent real estate bubbles, and address overcapacity—all of which are real problems—as well as capital outflows, then for China's financial leaders, all these issues will be placed before them, and they will have to make trade-offs. It is not an easy task.

At the same time, uncertain events are also occurring in the world. This is not only China's problem but also the world's problem. Under such circumstances, preventing possible "black swan events" has become increasingly important.

21st Century Business Herald: What is your analysis of the state-owned enterprise reform measures mentioned in the Government Work Report?

Li Cheng: The Government Work Report used the concept of "zombie enterprises" for the first time, which is also new in the West. This also means that the Chinese government is addressing the problem of zombie enterprises, which is related to state-owned enterprise reform. State-owned enterprise reform does not mean privatizing all enterprises; rather, it means making some state-owned enterprises stronger and larger, while other enterprises can undergo many structural adjustments. In particular, zombie enterprises should be changed through the Bankruptcy Law or other mechanisms. In fact, this also gives private enterprises more opportunities and a fairer competitive environment.

21st Century Business Herald: Premier Li Keqiang also mentioned that, amid "the trend of anti-globalization" and "protectionist tendencies," China "will continue to promote the liberalization and facilitation of international trade and investment." In what areas can China contribute to globalization?

Li Cheng: China is already making many contributions, including the Belt and Road Initiative and the Asian Infrastructure Investment Bank. Of course, some Western countries have doubts, especially the United States, but the European Union and Australia are very enthusiastic about this change, not to mention China's neighbors, and emphasizing infrastructure is the right approach.

U.S. President Trump is also redesigning U.S. economic policy, such as cutting taxes, bringing manufacturing back to the United States, and rebuilding infrastructure, in order to change the unfavorable situation in the United States. But infrastructure investment cannot be separated from labor and financial resources, and sooner or later it will require international cooperation and China. This is also an aspect of U.S.-China relations worthy of attention. Only through cooperation can there be a win-win outcome. The United States cannot succeed by closing its doors. Therefore, he will ultimately adjust his policies and cooperate with China.

21st Century Business Herald: So the door of the United States cannot be closed?

Li Cheng: I don't think it can be closed.