Edmund Phelps, winner of the 2006 Nobel Prize for Economic Sciences, emphasized the significant role of innovation in economic growth.

"I think what China should be aiming for is more business innovations, conducted by business people and inspired by their ideas," Phelps said.

To the extent that there is such innovation, there will be increased business investment demand and increased jobs. "That's the way to go," he said.

The Chinese government has on many occasions stressed the importance of innovation-driven growth.

According to Li Keqiang's speech at the Summer Davos opening ceremony, China is implementing a strategy of innovation-driven development at a faster pace. It is doing this by promoting technological innovation and deep integration of science and technology with the economy and building a social environment friendly to innovation and business start-up activities.

Phelps said the country should encourage the financial sector to develop the capabilities to lend to businesses for their innovative investment projects.

"There is certainly room for redirecting investment expenditures from the construction of skyscrapers to financing business investment," he said.

Phelps believes that it is becoming more imperative that China's economy be transformed into one of high economic dynamism that requires the participation of the labor force right down to the grassroots.