This is not to say smooth sailing lies ahead. The Chinese bureaucracy must adapt radically to cope with the risks - and take advantage of the benefits - of technology and globalization, with the biggest challenge being the shift to a knowledge-based, environmentally conscious, inclusive and stable industrial base. And the government must take steps to enable market forces to play a greater role in directing economic activities, including by reducing licensing and regulatory requirements for the private sector.

China is reforming its inefficient approval-based system of initial public offerings to one based on registrations. A more active and efficient IPO market will allow companies to meet their financing needs without bank intermediation - a step that is vital to helping companies eliminate their debt overhangs.

In fact, reducing the role of banks is essential to balancing China's economy. Despite the recent rebound, China's stock-market capitalization amounts to only 40 percent of GDP, while banking assets total 266 percent of GDP. And only 10 percent of total social funding comes from the equity market.

But there is one important component missing from the government's reform agenda for 2015: improved bankruptcy procedures for failed borrowers. Unless failed borrowers and projects exit the system quickly and smoothly, the market will be saddled with bad debt and incomplete projects, undermining its performance.

China has repeatedly proved its durability and adaptability. It must do so yet again, by ensuring that its "new normal" is as stable, sustainable, and inclusive as possible. This entails strengthening its institutional foundations and establishing clear, transparent rules in order to encourage experimentation and innovation, ensure the smooth exit of failed projects and manage the fallout of errors.

Failure may be the mother of success - but only if one makes the effort to learn from it. Fortunately, China's leaders seem intent on doing just that.

Andrew Sheng is a distinguished fellow of the Fung Global Institute and a member of the UNEP Advisory Council on Sustainable Finance, and Xiao Geng is director of research at the Fung Global Institute.

Project Syndicate