8 Because of fear of negative interest rates and the lack of investment channels, social free money is forced to invest in housing industry, which causes housing bubbles.

Now the infrastructure is probably oversupplied, the society hungers for a transition to a "New normal". The old model of financial repression needs to be replaced by financial liberalization.

However, the old model has been applied for such a long time that the transition is not an easy one. In comparison to former government, this government has accelerated the move. It has started to allow private capital to enter banking industry, started to relax interest rates control, tried to use the free trade area to experiment relaxation of capital control and even set a timetable for implementation of a registration system for the listed company.

As the government still needs cheap money for government investment to stabilize the economy, China may not choose the sudden deregulation of financial markets, or the "Big Bang" financial reform, as UK in 1986 or Japan in 2001. But China has to hurry up.

On the one hand, the old model cannot carry on. The State-owned enterprises control too many resources but lack innovation. The government investment's efficiency has greatly decreased. The debt of government, default rate of bank loans and housing bubbles can be fatally risky.

On the other hand, a new economy driven by consumption and entrepreneurs needs a healthy financial market to flourish. The society badly needs entrepreneurs and consumers, but people's consuming power is too low and costs to start business are too high. But the distorted price of capital causes not only a waste of money in inefficient projects but also lack of fund for profitable ones.

The new normal of financial policy is especially expected. But the transition is not an easy one. The economic growth, calculated by GDP growth, still heavily depends on government investments. The center and local governments need the old model to ease their existing debts. What's more, there are entrenched vested interests. These can be reasons of elongated road of financial liberalization.

The author is a lecturer at the Management School of the Shanghai University and a research fellow at the China Europe International Business School Lujiazui International Finance Research Center.