The government is likely to stay on course for a neutral monetary policy in 2018 and will not become more stringent than this year in order to stem a slide in economic growth, according to researchers of a leading think tank advising the government.

They said key financial risks lie in debt problems, which will require at least another three years to see a major improvement.

Risks from the high debt level of State-owned enterprises and local governments will lend more urgency to efforts in the next year to ensure financial stability, said Li Yang, director of the National Institution for Finance and Development of the Chinese Academy of Social Sciences.

“The central government is attaching more importance to the quality of economic growth rather than the sheer volume of growth,” he said.

His comments are in line with policies in a statement released after the Central Economic Work Conference.

China will continue to adopt a prudent and neutral monetary policy and a proactive fiscal policy in 2018, according to the statement. China must build and improve the mechanisms for pushing ahead high-quality development, the statement said.

“Propping up growth through increased borrowing is not a sustainable option. If debt problems remain unresolved, this will affect the overall health of the economy”, Li said.

Deleveraging is bearing fruit since the authorities made this one of the nation’s key economic tasks.

China’s debt level only grew slightly in the first three quarters. The debt level of the non-financial sector declined 2.9 percent year-on-year in the first three quarters, according to data from the think tank.

But progress has been uneven as borrowing by State-owned enterprises and local governments has risen, data showed.

Another three years are needed to see a major improvement in the overall debt structure, because leverage cannot be reduced at a fast pace, as this would result in a sharp slowdown in economic growth, according to Li.

To ensure growth, the central bank may need to relax some grip on liquidity in some areas next year with more frequent use of liquidity management tools, he said.

Lou Feng, a researcher with the Chinese Academy of Social Sciences, said: “China needs to adopt a more proactive fiscal policy to fuel growth next year. Such efforts include an improved deficit level and achieving fiscal distribution across the regions in a more efficient manner.”

China may see slower overall growth in 2018, according to the forecast by the CASS.

The economy is expected to grow by 6.7 percent year-on-year in 2018, slowing 0.1 percentage point from this year.