Interview: China correctly maps out future development model: U.S. expert (2)

"I think there are some encouraging signs from recent growth, especially the increase in the role of domestic consumption," he added.

His words resonated with Chinese Premier Li Keqiang's emphasis on the importance of improving the quality and benefits of development, with focus put on promoting economic restructuring and upgrading.

Since major structural problems still exist, Lieberthal said, the focus would be whether the changes envisioned by the Chinese government will put China on a more sustainable growth trajectory.

"The government has stressed very strongly it is committed to economic openness and economic reform," Lieberthal said. Because the political system in China is so engaged in the way the economy functions, adjustments in the operation of political system are also needed to enable the economic reforms to have their appropriate impact, he added.

The urban household registration system, which in his view limits opportunities available to rural migrants, is a built-in constraint on China's domestic consumption as a driver of the economy. Revamping it would help unleash the potential of growth and promote social mobility, he noted.

It is very important to have good framework for competition and to allow the private sector to compete effectively is key to build economic competitiveness, said Liberthal.

"Government direction and investment are needed for some fundamental things... but greater liberalization would probably serve China's interests very well," as "market is a very efficient allocator of capital and can provide strong incentives."

At a recent meeting, Chinese Premier Li called for less political power in the market economy in order to motivate creativity of market players and achieve transformation of the government.

China has been a workshop to the world. However, the world's largest manufacturer has few private world-class enterprises.

Lieberthal said China has several enterprises with global presence but few world-class enterprises in the real sense.

He did not think providing large state-owned enterprises with subsidiaries and cheap access to capital is the right way to nurture world-class companies, but taking market-oriented measures to vitalize the private sector is.

Lieberthal said he had been to Chengdu many times since the 1970s, and was impressed by the changes that took place in the city. He said one major issue in development of China's western region is how to enable local residents to benefit from the value created.