The lowest quarterly GDP growth in five years, cooling real estate sales, weak manufacturing activities, and slower growth in industrial output.

The Chinese economy is facing the biggest challenge since it was hit hard by the global financial crisis five years ago. Worse, policymakers can no longer afford to launch massive stimulus programs to bail it out. They seem to have no way out but accelerate reform and restructuring agenda in an attempt to gradually lead the economy out of the woods.

With its GDP growth at 7.3 percent year-on-year in the third quarter, the lowest this year and the worst since the first quarter of 2009, China is facing the risk of falling short of its annual growth target. But the worst scenario could also mean the start of a recovery.

The low growth rate is caused by weak economic activities, as indicated by a slew of economic indicators in recent months. It is also a result of higher base in the third quarter of last year, when GDP expanded by 7.8 percent.

But there have been signs of improvement in the economic data in September. For example, industrial output growth was 8 percent year-on-year, compared with 6.9 percent in August. Trade growth also beats market expectations and retail sales remained stable in September.

If the trend continues, the Chinese economy could gradually pick up in the fourth quarter and could either meet the annual growth target or come close to it.

Moreover, as the effect of the country’s mini-stimulus measures surfaces, there would be a boost to the economic growth in the fourth quarter.

The lower base in the fourth quarter of last year will also contribute to the GDP growth rate in the fourth quarter this year.

After China released its second-quarter economic data in July, the market has actually expected to have lower readings in the third quarter. The real test, therefore, will come after the fourth-quarter data come out early next year. If the economy cannot recover as expected in the fourth quarter, it will cause great panic among investors.

So far, policymakers have had few safe tools in its toolbox. They cannot use major stimulus programs for fear of triggering more problems, such as pile-up of local government debt. Instead, they opt to use targeted stimulus of limited scale to boost some key sectors while accelerating reform and restructuring agenda to unleash the potentials of the economy and lay groundwork for future sustainable growth.

In the short term, however, the benefits of implementing such reform and restructuring agenda will not be able to offset the adverse effect of the weakening real estate and manufacturing sector. The financial market would have to endure some turbulence as investors respond to the weak economic data in the third quarter.