The Chinese economy is entering a new stage of medium-paced growth after rebounding last year, according to a senior economist. It is a stage that could be exposed to major risks brought by accumulated local government debt driven by unbending investment impetus, the economist said.

Still, what is happening in terms of China's economic transformation, led by supply-side structural reform, has been an example of success that the world can follow, said Liu Shijin, vice-president of China Development Research Foundation.

Liu said he thinks the country's GDP growth will fluctuate between 5 and 6 percent in the coming years. He expects a slightly slower growth rate in 2018 than last year's 6.9 percent because of less-aggressive infrastructure investment and more aggressive efforts to contain local government debt.

Hidden local government debt, mainly injected into infrastructure projects to boost GDP, is seen as one of the largest threats to economic stability, Liu said. It is more risky because the total amount cannot be measured when funds are raised under the table, according Liu.

"When the waves pull back, the sand becomes visible," he said. Financial risks may become apparent during a transition period when GDP growth could cool down to around 6.5 percent after four decades of high-speed growth, said Liu, who is also a member of the 13th National Committee of the Chinese People's Political Consultative Conference.

The Ministry of Finance said that by the end of 2017, China's outstanding debt had reached 29.95 trillion yuan ($4.7 trillion), with 16.47 trillion yuan in local government debt, or 55 percent of the total.

Local government debt is budgeted at 20.997 trillion yuan this year, according to a report the Finance Ministry submitted to the National People's Congress for review. The quota was set at 18.82 trillion yuan in 2017.

The good news is that the economy picked up in the first two months of this year, led by stronger investment and exports.

In January and February, investment momentum rose with nominal fixed asset investment growth at 7.9 percent, up from 6.4 percent in the fourth quarter of 2017. Export growth surged to 17.7 percent from 6 percent during the same period, according to the National Bureau of Statistics.

Production cuts in industrial segments with excess capacity also have taken effect, driving up the growth of industrial profits in 2017 to year-on-year growth of 21 percent, compared with 8.5 percent in 2016, indicating the success of supply-side structural reform, Liu said.

The 2018 Government Work Report, delivered by Premier Li Keqiang at the first session of the 13th National People's Congress, highlighted the shift in economic growth to a quality-oriented model, including additional plans to prevent financial risks and accompanied by more efforts to boost innovation, restructure the tax system and further open up local markets.

"Given the gradual fine-tuning by policymakers to balance growth with reform and deleveraging, we maintain China's 2018 GDP growth forecast to be 6.4 percent this year," said Louis Kuijs, head of the Asia Economics Department at Oxford Economics, a British think tank.

The monetary and financial policy stance will continue to be shaped by the continued tightening measures for the regulatory side to contain leverage and rein in financial risks. But policymakers may apply only a gradual brake on credit growth, Kuijs said, for the sake of maintaining stable economic growth.