To avoid the so-called "middle- income trap," China should change its growth model of simple manufacturing production, a leading Australian economist specializing on Chinese economic studies, offered this advice in a recent interview with Xinhua.

Perter Drysdale, emeritus professor at Crowford School of Public Policy of the Australian National University (ANU), said that if the Chinese economy is to continue to grow, even at a moderate rate, and avoid the "middle-income trap," it has to graduate from simple manufacturing production, relying on mobilization of labor, to growth led by industrial upgrading, driven by high rates of human capital formation and research and innovation.

The annual National People's Congress of China is scheduled to be held early this month when the country's new leaders are expected to fully complete the transfer of power in the world's second largest economy.

Drysdale, who also heads ANU's East Asia Forum and East Asian Bureau of Economic Research, said the priority for the new Chinese leadership is to conduct economic reforms"that will foster entrepreneurship, human capital formation and creativity."

Drysdale lauded the new Chinese leaders for focusing on a " green economy" and for their willingness to tackle financial market reforms as a top priority. "Among the unfinished tasks are the need to fix the relationship between state and state-owned enterprises (SOEs), deal with state monopoly of key sectors of the economy, improve corporate governance, reform the financial market so that private business has fair and equitable access to capital for investment, and improve the regulation of enterprise and China ' s legal system as it affects the way the market functions," Drysdale said. "As entrepreneurial-driven growth has to overtake factor-driven growth if the pace of growth is to be sustained, the urgency of finishing these reforms will be more pressing,"he added.

Drysdale agreed with the Chinese leadership's judgment that China is now faced with fresh opportunities as well as new challenges of expanding domestic demands, improving innovation ability and prompting the change of its growth model.

He also conceded that it would not be an easy task, explaining that this "requires deep institutional, even cultural, reforms with important political dimensions to it." "Many people are thinking hard about the economic and political challenges that China faces in the years immediately ahead, in particular about the nexus between continuing economic success and political reform,"Drysdale said.

Addressing the recent debate among Chinese media about what aspects the sense of happiness would involve, Drysdale said apart from economic and social security, a critical dimension of happiness relates to a sense of fairness and social equity for oneself and one's family and for others.

China's new leaders have vowed to conduct further reforms on income redistribution and social security to ensure that the public can enjoy the fruits of economic growth in a better and fairer way.

Chinese government's statistical department for the first time released Gini Coefficient, which was hailed by Drysdale as a " critical beginning" although they are not policy targets that can be changed by single instruments.

Drysdale said that fixing the problems of economic and social inequalities requires reforms on many fronts and will be very complex.

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