Another challenge is how to revamp China's healthcare system as 80 percent of the rural population and 50 percent of the urban population are entirely uninsured. Out-of -pocket spending on medical costs amounts to 60 percent of total costs nationally, and 90 percent in rural areas.

Moreover, 70 percent of those refusing hospitalization cite cost as a major reason. Health costs are now responsible for 33 percent of new poverty. The maternal mortality rate in Shanghai is 9.6 out of 10,000 births, in Guizhou it's 111.0, and in the Tibet Autonomous Region even higher. Migrant women represent only 10 percent of urban pregnancies, but two-thirds of maternal mortality.

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These are challenges which the Chinese government is very aware of as the country starts what could be considered its third phase of growth and development.

Yes, the growth rate will continue for the simple reason that there are still inefficiencies in the system.

As China develops better policies, the inefficiencies will be corrected and growth will continue. The 11th Five-Year Plan (2006-10) evidences a very conscious link between new shifts in balancing development and reducing urban-rural gaps as well as links with new institutions.

There's a clear recognition that China must adjust current institutions to deliver on promises. They need to manage a more balanced development. This is not happening right now.

Unification of the rural and urban economies will bring benefits of scale and efficiency when the time comes. Right now they are segmented, and there is a lot of debate on how to unify the service part. In fact, China needs to unify the production systems part.

Structurally marketization is making traditional economic institutions increasingly important. For example, the stock market needs better regulation and more transparency.

If you look at the coastal regions, 80 to 90 percent of new growth is market driven. But for the less developed northeast provinces, only 40 percent of new growth is market driven. So as less developed regions catch up, there's a lot of potential.

Given the strong economic fundamentals, if realignments succeed, this may well be only the beginning of China's growth. So Deng Xiaoping's prediction that the well-off xiaokang society would be achieved by 2020 is likely to happen.

Policies are moving in the right direction. With the "new socialist countryside", China's goals are very similar to the UN's Millennium Development Goals.

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