China still has enormous potential for economic growth through the services sector, and is capable of curbing financial risks like the debt of State-owned enterprises and local governments, a senior official said.

Xu Zhong, head of research at the People’s Bank of China, made the remarks at a seminar at the Counselors’ Office of the State Council on April 26.

Rich potential exists for China’s economic upgrade and growth via three major areas: the ongoing urbanization process, rural revitalization and the services sector, Xu said.

He said China’s urbanization process, which has created robust growth momentum in the past two decades, entered a new stage in 2012. Ever since then, more people have been attracted to tier-1 and tier-2 cities, with few moving toward tier-3 or tier-4 cities.

But, the central government’s decision to implement the strategy of rural revitalization will help boost growth in rural areas, he said.

He said China has passed the Lewis Turning Point, a concept that indicates a country’s surplus rural labor has reached a financial zero, causing a labor shortage and, consequently, a rise in the wages of agricultural and unskilled industrial workers, until a labor surplus is reached again.

Xu said China still has about five to 10 more years to enjoy its demographic dividend. Effective economic structural reform will be crucial during this time period for China to maintain healthy and strong growth, Xu said.

He said the country’s overall financial risk is currently controllable. Yet, more efforts are needed to curb SOE and local government debt, in order to prevent systemic financial risks in the long run.

He said it is of critical importance for China’s current round of structural reform to be productive and effective.

“China is not the only country working on economic structural reform. Many countries around the world are doing the same, including monetary policy normalization, after the (2008) global financial crisis,” he said.

“The key for every country is a successful structural reform to improve total factory productivity. Those who first achieve this will automatically attract investment and resources of all kinds.”