In the late 1990s, most state-owned enterprises (SOEs) reported huge losses, forcing the government to reform, Wu said. In particular, in 1998 when Zhu Rongji was appointed premier, it was considered the most dangerous time for many SOEs to survive, he said.

Thanks to Zhu's strong efforts to push forward economic reform, China's economy was in fine health at the start of the 21st century, Wu said. But he warned that the broad economy now faced serious systemic risks.

Wu, a key economic adviser to late paramount leader Deng Xiaoping, who started the country's opening-up economic reform in the late 1970s, blamed snowballing corruption, particularly among so-called special interest groups, excessive money supply and 'internal debt', such as with local government, for the growing economic risk in the country.

'I believe the central bank and other departments can maintain the stability of the Chinese economy for the short term. Those people are very capable. But you just don't know when a crisis may break out,' Wu told the Post while in the city to give a lecture at the University of Hong Kong.

Wu said any potential economic crisis in China would be very different from the 2008 global financial crisis that started in the United States because the US had a huge amount of foreign debt to repay, but the country's debt problem would only involve 'internal debt'.

In late 2008, Beijing announced the landmark four trillion yuan (HK$4.9 trillion) economic stimulus package to help the country's economy keep growing despite the worsening global crisis affecting the West.

The government also made a total of 10 trillion yuan in loan expansion to help maintain national economic growth.

Wu said it was ridiculous that most of the government money had flowed to many SOEs and big national infrastructure projects rather than to help the private sector, which already contributes more than 60 per cent of the mainland's annual economic growth and is a major source of jobs.

'The result is many SOEs get too much money to spend and decide to expand aggressively, even outside their own industries, for example, to pour a lot of money into the real estate sector, and then you see the ordinary Chinese complaining about rising property prices.'

Wu is well known on the mainland as 'an economist with heart for Chinese people', especially among retail investors in the stock market, for his blunt comments on the country's economic reform.

In the interview with the Post, Wu said he knew some of his comments made some Chinese leaders unhappy but he had also made a lot of friends among those leaders who supported his views.

Nanjing-born Wu currently holds two major official titles: he is a senior fellow at the Development Research Centre of the State Council, China's cabinet, and a professor of economics at the China Europe International Business School in Shanghai, which he describes as his second hometown.

Asked about the mainland's stock market, one of the world's worst performers last year, Wu said he still held the same view he shared with the public about a decade ago.

'China's stock market is like a casino - and sometimes it's even worse than gambling,' he said.

'When you play cards, you should not know what cards are in your rival's hand, but in China's stock market, information asymmetry is a very big and serious problem.'

Wu said Guo Shuqing, the newly appointed chairman of the China Securities Regulatory Commission, apparently had 'a lot of new and good ideas' to reform the stock market, but he also advised that Guo should act cautiously because market reforms could affect many vested interests.

Wu said he believed economic reforms could help most people, but he strongly opposed so-called special interest groups who enrich themselves from reforms through their political power and connections.

Wu did not name any, but it is widely known on the mainland that sons and daughters of central and local government leaders are often involved in 'special interest groups'.