"It needs to be driven by innovation and there is no way that this can be accomplished by State-owned enterprises."

Xu, who nonetheless believes China's GDP will overtake that of the US by 2018, believes growth could fall below 4 percent in the 2020s as the economy suffers from the "convergence effect" - the nearer it gets to the world's technology frontier, the slower its growth rate becomes.

"The export-led model has come to an end for China. China is already an upper-middle-income country, and the room for catch-up is significantly smaller than 30 years ago."