A major government think tank on Tuesday predicted "a stable growth with medium and high-speed" for China's economy in 2014, but said that high local government debt, employment and environmental issues still challenge the country's development.

According to "The Economic Bluebook: Analysis and Forecast of China's Economy in 2014," issued by the Chinese Academy of Social Sciences, the country's GDP will increase by about 7.5 percent in 2014, and reform, opening up and economic restructuring will accelerate.

China's economy still faces many difficulties, such as high local government debt, increasing reliance on "land finance," inadequate liquidity risk controls. Meanwhile, shadow banking products are rising fast, and there is severely unbalanced supply and demand in some regions' real estate market, said the bluebook.

Other challenges mentioned in the book include a "workers shortage" coexisting with college students' employment difficulties and worsening environmental degradation that affects people's health.

"Unbalanced, uncoordinated and unsustainable development will still exist in the future," it said, adding foundations for a stable economy are still not solid and the endogenous driving force for economic growth needs strengthening.

According to the bluebook, 2014 will see China maintain an active fiscal policy, improve structural tax reductions, optimize debt structure, boost efficiency of government funds, implement a prudent monetary policy, maintain moderate growth of currency loans, optimize allocation of financial resources, further promote interest rate deregulation, and keep the RMB's exchange rates basically stable.

China's economy will "enter a stage of medium and high-speed growth from an excessively high-growth," and the annual increase of fixed assets may gradually fall, it said.

The country will continue with strategic measures to expand domestic demand and drive innovation, maintain "reasonable investment growth," encourage consumption and technological innovation and discourage "GDP worship" in local governance assessment, the book added.