SANYA, Hainan - The massive stimulus that saved China's economy has also caused many headaches for the country and is now forcing the country to change the way in which its economy is developing, a prominent economist said Thursday.

Cheng Siwei, former vice chairman of the Standing Committee of the National People's Congress, said the 4-trillion-yuan ($585.5 billion) stimulus package, which helped lift China out of the 2008 crisis, has also created overcapacity, inflation and local debt crises.

Cheng made the remarks in a speech at the ongoing BRICS Friendship Cities and Local Governments Cooperation Forum.

Although the stimuli helped China achieve economic growth of 9.2 percent in 2009 and saved jobs for 8.53 million people, the massive investment has caused overcapacity issues in many industries and a decrease in investment efficiency, Cheng said.

Record lending in 2009 also created several lingering problems, including inflation, assets bubbles and local government debt issues, he said.

According to Cheng's calculations, a total of 2.5 trillion yuan was poured into the property market in 2009.

China should work to encourage domestic consumption, create a "green" economy and start reforms in its educational system in order to change its future economic development, he said.

Cheng also pointed out that China needs to further open up and reduce its foreign reserves.

China should maintain its foreign reserves at around 20 percent of the country's GDP, or about $1 trillion, he said. China's foreign reserves stood at $3.20 trillion as of September this year.

China should also let its foreign exchange system more flexible, making yuan an international currency and completely convertible, he said.

China needs to strive for more balanced foreign trade, encourage outbound investment and facilitate the development of free trade zones, he said.