BEIJING, Feb. 13 -- China's emerging tertiary industry will determine economic reforms in the future as the country has entered a key period of industrialization, a prominent economist said.

The transformation and upgrade of the economy will depend on whether China can steer its economy on to a service sector-led path by 2020, director of the China (Hainan) Institute for Reform and Development, Chi Fulin, said on Thursday.

Chi said the country, which is on the cusp of growth; restructuring; and reform, is facing three major trends: The improvement of Chinese manufacturing, ongoing urbanization that features quality and growing consumption, which is increasingly in favor of services rather than tangible merchandise.

"Given the trends, China is laying the foundation of restructuring an economy that is led by service sector by 2020," Chi said, adding the new model will help to realize 7 percent growth and avoid the middle income trap.

Jing Ulrich, managing director and vice chairman of J.P. Morgan Chase Asia Pacific, also underlined the significance of the service industry, saying the sector will replace manufacturing, the traditional engine of growth, to drive economic growth in 2015.

The world's second largest economy has been increasingly reliant on the robust service sector to tackle looming downward pressures. The added value from the tertiary sector accounted for 48.2 percent of GDP in 2014, signalling improved economic structure.

However, Chi said the ratio was well below the 70 percent level of developed countries and challenges still remained.

The Chinese economy expanded at 7.4 percent year on year in 2014, the lowest reading in 24 years, official data showed.