HONG KONG  -- China needs to continue to rebalance its economy and reduce dependence on exports to achieve sustainable development, an economist said on Thursday.

China cannot continue to depend on "overseas demand" for economic growth and needs to "shift away from reliance on exports of low value-added goods," Victor K. Fung, chairman of the Fung Global Institute, said at the ongoing annual conference of the Institute for New Economic Thinking (INET), which lasts from Thursday to Saturday.

China has no longer been the factory of the world because of higher production costs and has focused more on domestic consumption to boost economic growth, said Fung, who is also chairman of the Fung Group which comprises major subsidiaries in trading, logistics, distribution and retailing.

Due to the global economic turmoil and sluggish external demand, China's exports rose 7.9 percent year on year in 2012, slower than the 20.3 percent growth registered one year earlier.

"The alternative for China is China itself," Fung said, adding that the country needs to strengthen its service industry to speed up economic rebalancing.

China is the only major emerging economies with service sector accounting for less than 50 percent of gross domestic product, data showed.

Nobel prize-wining economist Micheal Spence shared the view with Fung, adding that the country needs to improve its social security system and allow more competition to encourage innovation.

The INET is a New York City-based economic research and education foundation designed to broaden and accelerate the development of a new field of economic thoughts that will lead to the real-world solutions to the great economic and social challenges.

Titled "Changing of the guard?" this year's annual conference focuses on crucial global issues with topics including "Growth Adjustment and Convergence in Asia: The Challenge Ahead" and "The RMB and the Future of Asian Finance."