With the government preparing its work reports for the National People's Congress next week, what are the biggest macroeconomic and structural reform challenges China faces in the year ahead?

On the macroeconomic front, China has entered 2013 with solid growth momentum, in no small part because of the policy stimulus of last year, but now, three challenges call for containing the expansion of financial leverage.

First, inflation is on the rise, largely on the back of higher food prices. This time the food price cycle may not be as pronounced as previous ones, since the global raw commodity price setting is more benign and prices of manufactured goods face only modest upward pressure. Nonetheless, policymakers are right to be sensitive to higher inflation.