CANBERRA, March 7 -- The government work report Chinese Premier Li Keqiang delivered Thursday serves as a window to better understand China's "new normal," says an Australian observer.

"Li Keqiang sees China operating in an increasingly unpredictable global environment, but with an improving domestic economy that is stable enough to face external challenges," Hans Hendrischke told Xinhua in a recent written interview.

The focus of international newspaper headlines on the 7 percent GDP growth target as the "new normal" is misplaced, the economics professor at University of Sydney stressed, pointing out that actually the 7-percent growth was the original target set in China's 2011-2015 development plan.

The "new normal," a phrase to describe China's current economic situation, "includes the successful rebalancing of the Chinese economy towards a consumer and service economy," noted Hendrischke, a fluent Mandarin speaker who once worked in China as a diplomat for many years.

With consumption now contributing 51 percent to economic growth and the value-added of the service sector accounting for 48 percent of GDP, "these measures are several percentage points above the original targets for 2015," he continued.

These achievements, together with those in poverty reduction and social inclusion, "show that the government has been able to over-fulfill on its commitments," said the professor.

The "new normal," he added, also includes an acute sense of the risks of the middle income trap facing China's industrial structure, as "Li Keqiang acknowledged that the traditional low-cost manufacturing basis of the Chinese economy is no longer sustainable.

"The new normal is a stronger service orientation and high-end manufacturing in areas where China will have to create its own markets by extending its domestic economies of scale, for example in infrastructure and transport, into global markets."

Operating in these markets requires institutional reforms, which Hendrischke referred to as another element of the new normal.

Reforms on public finances and the state-owned sector "have now moved onto the government agenda as successful experiments, preparing the ground for their wider adoption during the 13th Five-Year Plan," which will be rolled out in early 2016, noted the observer.

Internationally, the "new normal" is more complex than the "old normal" of business, Hendrischke said, adding that "the world economy is undergoing profound adjustment, its recovery lacks drive, (and) the influence of geopolitics is increasing."

The Chinese premier is anticipating growing economic difficulties, and his response is a more proactive foreign economic policy that integrates foreign trade and investment into China's regional and global strategies, he said.

"The overall strategy is to make China an international trade and manufacturing hub with its own value chains extending globally, parallel to the North American and European hubs."

Hendrischke noticed that Australia was mentioned twice in Li's report, once in relation to the development of free trade zones and once in regard to the free trade agreement between the two countries.

"This shows that Australia is an important player in China's regional strategy," he said.

"Australia stands to benefit from the new normal as a contributor to Chinese value chains, in particular those in services, including education, agribusiness, high-end manufacturing and other focal areas in current policies and the next five-year plan."