CHICAGO, Jan. 25 -- Despite the achievements made in the past three decades, China should change its development mode in order to continue its prosperity, suggested U.S. experts on China.

James McGregor, an American author, journalist, and businessman who has lived in China for more than 25 years, made the suggestion Friday in a discussion with Chicago business circle at the invitation of Chicago Council on Global Affairs.

McGregor said that China is now the world's second largest economy and largest exporter. The processing industry of the "world's factory" has helped 50 million people to shed poverty.

"Never before in human history has life changed for such a large number of people in such a short period of time," he said. "That's very impressive and China deserves a lot of credit for that."

However, McGregor noted that if China wants to continue its march toward prosperity, its development mode must be "overhauled."

He said the system that propelled its development is proven incompatible with global trade and business governance, and is running out of steam.

"Big central state-owned enterprises (SOEs) stand in the way," he said, adding that if SOEs were deprived of privileges and government subsidies, they would lose money.

Another challenge China faces is the huge demographic problem.

"China is getting old before it gets rich," he said.

There were 115 million people aged 65 and above in China in 2010, and by 2030, that number will increase to 230 million, he said. In the meantime, people aged from 20 to 24, the major workforce, will shrink by half in this decade, from 125 million to 65 million.

"The next wave of growth in China depends on the most down and trodden," he said, referring to migrant workers in cities.

He said there are about 260 million migrant workers in cities now, who are the next wave of consumers.

"China is dealing with considerable domestic challenges and the economy has continued to move forward in almost every conceivable way," said Jennifer Scanlon, president of USG Corporation Global Affairs.

Signs of deepening reform since November last year indicates that China's policy makers "are ready to let the market play a more decisive role" in the country's economy.

"Any level of reform in China will be closely analyzed," Scanlon said. "The decision that China is making now will be a major factor on the world economy for years to come."