Analyst says urgent reform is needed to maintain stability.

The vast majority of analysis published about the Chinese economy in the past 20 years has been overwhelmingly positive, particularly on the outlook for growth.

One of the few more bearish analysts is Gordon Chang, a lawyer and author who caused a sensation with his 2001 book, The Coming Collapse of China, in which he argued that non-performing loans posed a huge threat to stability and that China's accession to the World Trade Organisation could leave the economy vulnerable.

He remains hawkish, and believes China is entering a period of slower economic growth that will make some tough decisions on the economy necessary and make sweeping reform even more urgent.

"China's recent success is due to the structural economic reforms implemented in the Deng [Xiaoping] era and during the early part of Jiang Zemin's tenure. Since then, the country has been gliding, avoiding major reform whenever possible," says Chang in an interview.

"They call it 'gradualism', but what we are really seeing is complacency or even drift. The reforms that are implemented these days are either ratification of practices already adopted by the Chinese people, like the new property law, or change demanded by foreign investors, like accession to the World Trade Organisation."

Chang adds: "Senior Communist Party leaders believe that they are approaching the end of the reform era and now all they are doing is tinkering."

He believes China "will soon enter into a period of markedly slower growth".

"When this happens, senior leaders will have to decide whether they want to tackle tough issues.

"Unfortunately for them, many difficult tasks remain."

The Communist Party tends to focus on the economic benefits that socialism with Chinese characteristics has brought to China's 1.3 billion people, according to Chang.

He says there are forecasts that per capita gross domestic product will quadruple between 2000 and 2020 but, at the same time, party leaders say there is still a lot to be done to narrow the widening wealth gap.

"Change, in general, is tough for reforming regimes. Senior Beijing officials now face the dilemma of all reforming authoritarians: economic success endangers their continued control," he says.

Chang believes that only representative governance can save China from political uncertainty and turbulence, particularly as a middle class emerges that demands a greater say in its lot.

"The Communist Party has developed a political system that is, in many ways, inflexible. That means it will have a hard time crafting solutions for its pressing problems," he says.

Chang's father left China before the end of the second World War and Chang grew up listening to predictions that Mao Zedong's regime would have to fall.

He subsequently lived and worked in China and Hong Kong for almost two decades, most recently in Shanghai as counsel to US law firm Paul Weiss and earlier in Hong Kong for law firm Baker & McKenzie.

While he is hawkish on China's economic outlook, Chang has no doubt about its growing importance.

"The Chinese may not be the most powerful - Americans still are - but the Chinese exercise more influence in east Asia. Beijing concentrates on its portion of Asia while the United States has been focusing its attention elsewhere."

Dealing with environmental issues is a major challenge. "Seven of the world's 10 dirtiest cities are located in the People's Republic. The air is toxic and the water is carcinogenic. There is unnatural flooding as well as unnatural drought.

Beijing says all the right things about alleviating these problems, but it's not really serious.

"Environmental degradation is only getting worse over time because, for most of the leaders, economic growth is more important than anything else."

According to Chang, "it simply is not possible to report 11 per cent growth and make progress on the environment at the same time".