China's economy is set to suffer a further slowdown in 2015 as rebalancing pains become more acute, experts at the World Economic Forum (WEF) in Tianjin, China, have warned.
"In 2015, the property market will continue to slow, creating trouble for the economy which is searching for new engines of growth," Li Daokui, dean of the Schwarzman Scholars Program at Tsinghua University told CNBC on the sidelines of the annual WEF meeting in China, on Thursday.
"New engines of growth will take time to emerge," said Li, a former China central bank adviser, adding that the government should set its gross domestic product (GDP) growth target next year to as low as 7 percent, down from 7.5 percent target in 2014.
The world's second-largest economy, which is in the midst of transitioning towards a more sustainable consumption-led growth model, grew 7.5 percent in the second quarter, up from 7.4 percent in the previous three months.
"I would say the government will still need to be very proactive in putting together large infrastructure projects to hedge against the property slowdown, similar to what they have done this year," he said.
A slowdown in the real estate sector has grave consequences for the economy as it accounts for around 15 percent of China's GDP and is linked to some 40 other industries including cement, steel, chemicals and furniture.
Dariusz Kowalczyk, senior economist and strategist at Credit Agricole, also sees the economy slowing to around 7 percent next year. He expects the government will stimulate the economy less and lower its growth target.
Careful rebalancing act
As Beijing carries out a delicate rebalancing act to wean the economy off its heavy reliance on investment and exports, economists stress the need for the transition to be carefully managed given high debt levels in the country.
China has seen a rapid expansion in credit since the global financial crisis. Total debt has increased to 244 percent of GDP up from 176 percent, according to Oxford Economics.
"The movement from a 10 percent path to a 7 percent growth path must happen smoothly rather than going through fluctuations before it stabilizes," said Kaushik Basu, chief economist for the World Bank.
He expects growth to slow to around 7.4 percent in 2015 from World Bank's estimate of 7.6 percent this year.
The Chinese leadership present at the World Economic Forum has sought to quell fears around a sharp deceleration of growth in the mainland economy.
At the forum's opening plenum on Wednesday, Premier Li Keqiang said while the economy faces downside pressure, it is also highly resilient. He noted that the government has a full range of policy tools at its disposal.
This year, the government has rolled out several targeted fiscal and monetary measures to steady economic growth including boosting investment in railways and social housing and cutting the reserve requirement ratio (RRR) for banks that lend to the agricultural sector.