Wen Jiabao, China's premier, can be disarmingly honest about problems facing the Chinese economy. In recent years, he has referred to remarkable headline growth – overly dependent on investment and exports and skewed towards the big cities of the eastern seaboard – as “unstable, unbalanced, unco-ordinated and unsustainable.” Last week, in his annual “work report” to the National People's Congress, he warned that the performance in 2009, when China registered 8.7 per cent growth, did not mark a fundamental improvement. There was still “insufficient internal impetus driving economic growth,” he said, alluding to the reliance on state-led stimulus. Earlier, he had acknowledged concerns about asset bubbles, likening property markets in some big cities to a “wild horse”.

That leaves the government with the tricky task of trying to rev up consumption even as it grapples with the contradictions of overheating in some parts of an economy that, overall, is still reliant on stimulus. For the moment, fiscal policy will remain expansionary, with the budget deficit forecast to rise from 2.2 per cent of gross domestic product to 2.8 per cent. But approval of new infrastructure investment will be strictly controlled, signalling a slowing down of the credit expansion through which much infrastructure spending has been financed. On Saturday, Zhou Xiaochuan, governor of the central bank, also held out the prospect of a gradual revaluation of the renminbi, referring to its peg against the dollar as a “special” measure. Though no panacea, a stronger renminbi could help China's rebalancing by making consumers richer in dollar terms.

Gradualism in these tricky areas is inevitable. But one area where there has been much talk and not enough action is reform of the hukou residency permits. These divide Chinese citizens into rural and urban inhabitants. Most of the roughly 200m migrants working in the urban centres cannot register as city residents, thus depriving them of schooling for their children, income support and subsidised housing. Mr Wen has given little detail about how Beijing intends to tackle this issue. China needs a plan to allow people to become permanent city residents. That would help consumption by putting tens of millions of people on a sounder social footing, removing some of the anxiety that makes them prone to save. Like currency revaluation, reforming the unjust and outdated hukou system is not a panacea. But, properly managed, it would be the right thing to do.