On the fiscal front in Asia, space needs to be rebuilt to make room for future counter-cyclical policy and spending on priority areas for long-term growth, as well as to reduce vulnerability to current external risks. In China, we estimate that the general government debt, including local government liabilities, has doubled during the crisis to nearly 50 percent of GDP. While still not dangerously high, it is important to change the trajectory so as to move the economy toward a more self-sustaining growth path. In this respect, strengthening the management, transparency and overall governance framework of local government finances would help contain the stresses from growing local government debts.

If downside risks to growth materialize, there would still be room to provide some temporary and targeted fiscal stimulus, but this time through the central budget and measures aimed at lifting people's incomes and consumption rather than investment, in order to also facilitate the needed medium-term rebalancing of the economy.

Finally, as Asia's growth shifts to a lower gear and investors increasingly discriminate between countries based on economic fundamentals, the case for structural reforms to increase total factor productivity growth and weather future economic turbulence is becoming ever clearer. Specific agendas in different economies - ranging from reforms in goods and labor markets in most countries; energy sector and broader institutional reforms to boost infrastructure spending in India; and rebalancing toward consumption-driven growth in China - would go a long way toward fostering sustainable, balanced, and inclusive growth.

In China, the new leadership recognizes the primacy of reforms, including in key areas such as the financial sector and fiscal policy. All eyes are on the agenda to be unveiled at the Third Plenary Session of the 18th Central Committee of the Communist Party of China in November, which will help determine the future course of the Chinese economy,and thus have important global implications.

The author is director of the IMF's Asia and Pacific Department.