Lee called the Taiwan issue the most "imponderable" issue facing China's development and that one misstep by either the mainland, Taiwan's new government or the United States could negate China's hopes for economic growth and modernization.

"The mainland has time on its side, each year it will grow many times bigger than Taiwan," Lee told a gathering of Chinese officials and academics, including Premier Zhu Rongji.

"As long as the goal of eventual reunification is not at risk, the mainland can afford to be patient in its dealings with Taiwan."

Earlier this week in an interview in Singapore, the elder statesman urged new Taiwan President Chen Shuibian to seek ways to begin reunification talks with the mainland as the entire Asian region was at risk if hostilities broke out in the Taiwan Strait.

"Regional countries all support the one-China policy because they want to avoid what they fear is a costly and unnecessary conflict," he said.

Cross-strait tensions in the run up to Chen's March 18 election ran high as China's bellicose rhetoric failed to persuade Taiwan voters to choose a candidate other than the pro-independence Chen.

Lee further said China's ongoing economic reforms should be focused on developing high technology and urged Beijing to develop its capital markets toward private sector funding and refrain from over-regulation of the Internet.

"Although China has a high savings rate, 42 percent of GDP in 1998, little of this was channelled to the private sector, or even less to the high-tech start ups," he said

China's GDP growth could be increased by one to three percentage points per annum, if the digital revolution was thoroughly carried out in China over the long-term, he said.

"It is important to remember that it is not officials of government or state-owned coporations, but private individuals, who will spawn high-tech start ups."