Abstract: Economic restructuring is the main direction for the transformation of China’s economic development mode. But in the process of economic transformation, China’s economic growth has relatively slowed. There is a growing concern about the endogenous growth momentum and long-term trends in China. With HP filtering method and multivariate state space method, this thesis finds out that the potential growth rate in China has relatively declined from the double-digit before the global financial crisis in 2008 down to about 8% in 2012. Lower capital allocation efficiency, together with capital supply shocks, is an important reason for the recent decline in potential growth rate. For the long-term economic growth momentum in China, the breakthrough of new round of “promoting reform through opening up” lies in market-oriented reform and globalization configuration of capital element, which can take China (Shanghai) pilot free trade zone as a test base. The market-oriented reform of capital element needs the liberalization of interest rate and exchange rate, while globalization configuration of capital element depends on RMB internationalization and capital account liberalization.

Key words: potential growth rate, HP filtering method, multivariate state space method, &ldquo, promoting reform through opening up&rdquo, , capital element liberalization