China needs a second round of reform to achieve sustainable development, and the next five years will be crucial for the economy, Chi Fulin, executive director of the China Institute for Reform and Development (CIRD), said at a forum held in Beijing on Wednesday.

Chi said that the second round of reform should aim at turning China from a high-investment country to a high-consumption country, just as the first round of reform focused on the transition from a centrally planned economy to a market economy.

The second round of reform should concentrate on four main areas, according to Chi, who is also vice chairman of the Chinese Research Society for Economic System Reform.

Switch from investment-led growth to consumption-led growth.

Chi said consumption accounts for only 49 percent of China's economy, and household consumption is even lower at 35 percent. This is much lower than in the other BRIC countries, Brazil, Russia and India. He said that over the next five years, the share of personal income should be increased from under 60 percent to 70 percent, and the share of wages in GDP from 40 percent to 50 percent.

Accelerate urbanization

China's urbanization is lagging behind its industrial development according to Chi. Instead of simply plowing ahead with rapid industrial development, China needs an adjustment period. The next five years will be a critical period for accelerating urbanization, including urban-rural integration and giving migrant workers a stake in the cities, according to Chi.

"If everything goes well, over the next 5 to 10 years, China's urbanization rate should increase between 1 and 1.2 percent every year, even 1.5 percent, much higher than the current 0.7 percent. That is to say, the urban population will grow from 46 percent to 52 percent, an indicator that we have entered the era of urbanization," Chi said.

Increase the supply of public goods

After 30 years of reform and opening-up, the Chinese people have satisfied their basic needs in terms of food, clothing and so on. China has entered a new era in which public goods, such as healthcare, education, social security, employment, the environment, and public security are in high demand. Chi said that to meet this demand China needs to adjust its fiscal structure and establish regulations that protect social equity and sustainable development.

Promote the development of a low-carbon economy.

Policy should focus on saving energy, reducing emissions and changing people's lifestyles, Chi said. Building a low-carbon economy will be a major target of government investment. According to the National Development and Reform Commission, during the 12th Five-year Plan period (2011-2015) China will invest at least 2.2 trillion yuan (US$322.18 billion) to reduce carbon emissions by 40-45 percent per unit of GDP.