'China has reached point of no return'

China has reached a "point of no return" and the country has to now rely on innovation and reforms rather than depend on investment alone for economic growth, a senior official of a Chinese bank said on Thursday.

"China has reached the point of no return - the country needs to deepen reforms to avoid the middle-income trap," Chairman of the Board, Industrial and Commercial Bank of China Jiang Jianqing said at the World Economic Forum (WEF) here.

The comments come at a time when global markets are witnessing volatility amid rising concerns over slowing growth of the Chinese economy.

Jianqing said China could no longer depend on investment and need to rely on innovation and economic reforms to deliver the next wave of economic growth.

"Communication is key, there is a misunderstanding of policy in the new normal," he said while speaking at a session on 'China's Economy: Transitioning not Derailing'.

Participating in the session, International Monetary Fund (IMF) chief Christine Lagarde said it needed to be accepted that there would be a certain degree of volatility which is entirely compatible with market-driven principles. "IMF is forecasting a 6.5 per cent growth rate (for China) in 2016 and we see the transitions as manageable," she added.

For the first time in 25 years, China's economy grew at the slowest pace at 6.9 per cent in 2015, sparking fears over the health of the world's second largest economy as it embarks on painful reforms.

Goldman Sachs President and Chief Operating Officer Gary D Cohn said it was a difficult transition for any country.

"The shift from a capex to an opex economy means that the government has less control of economic growth," he noted.

Despite criticism, China is making a strong progress, domestic consumption has grown from 49 per cent five years ago to 52.5 per cent now, Fang Xinghai, director general, International Economic Department, Office of the Central Leading Group for Financial and Economic Affairs of China, said.

"We have to be patient as it is very difficult to communicate seamlessly with the market," he said, adding that China is learning and the reform strategy is on track.

Bridgewater Associates Chairman and Chief Information Officer Ray Dalio said that indeed, China is going through a cyclical adjustment which may last two-three years.

"A bad year in China is a great year in almost every other country," he said.