China's economy faces great challenges and new uncertainties brought about by the global economic environment and various countries' ailing stock markets, Premier Li Keqiang said on Monday

Recently Governor Zhou Xiaochuan had an interview with Caixin and talked about the yuan exchange rate regime reform, macro-prudential policy framework, digital currency and other topics. The following is an edited transcript of the interview.

China's economy can avoid a "hard landing" and shift to a lower, more sustainable growth rate if Beijing pursues reforms to state enterprises and sticks to a more market-driven and well-communicated exchange rate policy, the International Monetary Fund's chief said on Thursday.

Despite the slowdown, there is plenty of room for sustainable growth in the country, and the leadership’s newly announced plan promises to stabilize and expand China’s potential based on a solid foundation that’s often overlooked.

China has set its economic growth projection range at 6.5 to 7 per cent, an official from the country's top economic planner said at a briefing on Wednesday

There are many good investment opportunities during the present economic slowdown, and that is the major difference between China and the developed countries. Even if external conditions do not improve and export growth is weak, China's economy may still grow at 6.5 percent by relying on domestic investment and consumption growth, thus contributing around 30 percent of global growth annually.

There is no need to worry about the slide in China’s GDP growth and its turbulent financial markets, because the market economy has taken root across the country — a market of 1.4 billion consumers. Pressures from regional setbacks can be absorbed by the greater national economy, as long as the government pursues its transition from a real estate-driven economy.

China’s economy will continue to slide for some time in 2016, and the overall growth rate will be even lower than in 2015. However, the economy’s fundamental sectors portend a steady growth rate of 6.5-6.8%, depending on the progress of the reforms and restructuring, and on the developments of world economic situation. In any event, a major slump or “hard landing” seems out of the question.

Too often the debate about China’s economy has been dominated by naive proposals for supply-side reform – accompanied by criticism of the demand-side measures adopted after the 2008 global financial crisis. Those measures were far from perfect; they had to be formulated on the fly, in the context of an unexpected emergency. But they were far better than nothing.

The fears about the economic meltdown in China are overblown. The mismatch between progress in economic rebalancing and setbacks in financial reforms must ultimately be resolved as China transitions to new growth model. But it does not spell imminent crisis.