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Yet rather than applying socialist principles, the Chinese government is controlling the country by encouraging surging nationalism, Utsumi said. The former minister was speaking at a lecture to foreign journalists in Tokyo.
Comparing Japan's high economic growth period between 1964 and 1969 with China's growth since 2001, Utsumi recalled many similarities, including industrial pollution, an overheated economy and friction with trading partners. But one contrast he noted was that while communist-ruled China seems to have abandoned socialist principles, Japan, led by liberal democrats, adopted social policies that were sometimes termed "more communist than the East Bloc."
This trend dates back to Japan's post-war experience. Ironically, Utsumi pointed out, Japan's post-war economic resurgence was not only guided by the U.S.-inspired principle of a free market, but also by socialist egalitarian policies, also dictated by the U.S. occupation regime.
He referred, for instance, to the agricultural reform imposed by the Americans, who virtually forced non-cultivating landowners to release their lands to tenant farmers that made up three-fourths of the farming population before World War II.
Japanese people were also led to believe in the virtue of equality, which was reflected in such social measures as a one-time property tax, including even the royal family's real estate, and a progressive income tax rate that could go as high as 70 percent.
But it might already be too late for China to implement such socialist measures in order to balance its economic expansion, Utsumi said. In 2007 China recorded its fifth consecutive year of annual GDP growth over 10 percent, but while the economy was booming, the social fabric was ripping apart and the environment rapidly deteriorating.
There is a huge gap between rich and poor, which is most apparent between the coastal and inland regions, but also exists within the richer coastal region. China has failed to maintain the socialist egalitarian principle in its policies, which would have ensured a more fair distribution of the country's wealth.
While many more Chinese are getting university educations, according to World Bank statistics, China's illiterate population was 116 million people in 2005. And while many city parents can now afford to send their only child --thanks to the one-child policy -- to college, many cannot find suitable jobs after graduation.
Utsumi analyzes that the interests of those who benefit from development and those who suffer from it are sharply at odds in contemporary China. Corruption is rampant among those who control development policies. Yet the resultant air, water and soil pollution are problems that ultimately affect all Chinese, rich and poor alike.
Utsumi, whose 1957-1991 career at the Ministry of Finance spanned Japan's high-growth era, said the wisdom that allowed Japan to sustain two decades of high economic growth was its "stop and go" policy, which allowed it to effectively apply the brakes to the overheated economy when necessary.
The Chinese government is now tackling hyper-inflation of 8-9 percent annually. But slowing down the economy would surely cause additional, perhaps more serious social problems in a country where the majority are barely over the poverty line, Utsumi said.
In the medium term, basic problems such as securing adequate energy resources and maintaining a steady labor supply will be major challenges and potential bottlenecks to continued economic growth.
"This is indeed a very difficult moment in policy management for the Chinese leaders," said Utsumi. The crucial issue is whether Chinese leaders can find a way to apply a timely brake to the overheated economy, he advised.