Figures show policies by the State Council are taking effect, including trimming overcapacity and reducing taxes

China's 6.7 percent growth in the first quarter, announced by the National Bureau of Statistics on April 15, steadied nerves about the performance of its economy.

There were fears the data would be worse after the year began with China's stock markets tumbling and sentiment worsening. The figure was firmly within the 6.5 to 7 percent range that the government set for 2016 in March.

Many international financial institutions have now upgraded their 2016 growth projections on China. The International Monetary Fund, in its flagship report for April, increased its forecast for China's economic growth by 0.2 percentage points from 6.3 to 6.5, saying such an upgrade "reflects the country's announced policy stimulus".

China was the only country to receive an upgrade in a document that lowered its projection for global growth from 3.4 percent in January to 3.2 percent.

The World Bank's recent report put China's growth this year even higher, at 6.7 percent, adding that China will remain the main driver of growth in Asia this year.

On April 11, Premier Li Keqiang presided over a meeting at the State Council's headquarters at the Zhongnanhai compound in Beijing. There, heads of several major provinces and regions reported on local economic conditions in the first quarter.

Figures showed policies made by the State Council since January are taking effect, including trimming overcapacity and reducing taxes, to influence China's economic transition from being investment- and export-led to more consumption-driven.

Li said during the meeting that China's economic development showed good momentum over the first quarter.

"Major indexes are running higher than we expected during the first quarter, marking a stable start for the year ahead," Li said. "Many international financial institutions have recently upgraded their projection on China's economic outlook for the year," he said. "This suggests the world market has confidence in China."

Since January, the government has taken multiple measures to restructure the economy, as well as maintain growth, including reducing excess capacity, cutting taxes and devolving more power to lower levels.

The IMF report explains its reason for upgrading its China outlook, saying consumption growth would take up some of the slack of worsening performance by traditional industries.

"A further weakening is expected in the industrial sector, as excess capacity continues to unwind, especially in real estate and related upstream industries, as well as in manufacturing," it says.

"Services sector growth should be robust as the economy continues to rebalance from investment to consumption. High income growth, a robust labor market, and structural reforms designed to support consumption are assumed to keep the rebalancing process on track over the forecast horizon."

Maurice Obstfeld, chief economist at the IMF and one of the report's authors, said during a media briefing in Washington that he was optimistic about the Chinese government's policy stance.

"The near-term upgrade reflects our confidence that additional measures that the Chinese leadership is putting into effect can bring growth to the 6.5 percent level this year, which is the lower range of their target range of 6.5 to 7 percent. We see this stimulus coming and we upgrade the near-term forecasts on the result."

Some other international finance institutions, such as JPMorgan, Goldman Sachs and Credit Suisse, also raised their projections for China's growth. Credit Suisse recently revised its forecast for China's second-quarter growth from 6.3 to 6.5 percent.

Zhu Haibin, chief China economist at JPMorgan, suggests in his recent report that China's economy is showing signs of stabilization, raising the GDP projection for the second quarter from 6.7 to 7 percent.

All this seems to be in sharp contrast with earlier predictions this year, when fears of a collapse in China's economy were widespread.

When Li faced the media after the annual legislative sessions of the National People's Congress and Chinese People's Political Consultative Conference in mid-March, more than half of the questions that day were related to China's economy.

One reporter asked Li whether China's economic growth would fall below 6.5 percent, given the downward pressure from the world economy, as well as China's economic transition. "It is impossible for me to agree that China cannot achieve the growth target this year," was Li's answer.

This was the top story for many foreign news organizations the next day, including The Wall Street Journal, under the headline "Chinese Premier Paints Rosy Picture of Economy".

On April 15, the NBS figures showed China easily reached its GDP growth target for the first quarter. Growth in the services sector was even higher, at 7.6 percent, higher than industrial and agriculture sectors, while exports increased by 18.7 percent in March, the first rise for 18 months.

Yet the IMF also warns of long-term potential risks, pointing out the main challenge for Chinese authorities is a transition to a more consumption- and service-oriented growth model, while reducing vulnerabilities from excess leverage left by the prior investment boom.

"Our concern is some of the stimulus is likely to take the form of higher credit growth, more support for sectors that are in a secular sense declining and not that productive. So, we worry about the quality of growth more than the quantity of growth," Obstfeld says.

That is the challenge of the economic transition, Li warned local leaders during the meeting at Zhongnanhai. "We need to be aware that China is now undergoing an economic transition and faces multiple challenges while maintaining growth," he said.

One upcoming bold government move for economic restructuring is a tax reform that will replace business tax with value-added tax. That could cut an estimated 500 billion yuan ($77 billion; 67 billion euros) of tax on corporations this year. Li says such reform is an important tool to promote structural reform - supply-side structural reform in particular.

The reform will encourage more R&D expenditure by companies, boost demand through extended production chains, and make the environment more conducive to modern services.

The author is a writer with China Daily.