The government has set an economic growth target of 8 percent for this year in order to reign in the economy. Despite being non-binding, his statement is a sign of the central government's determination to rebalance the economy, analysts said. "It reflects a change in the government's attitude in that it focuses on quality," Hu says. "Quality has replaced speed as the top priority."

A big hurdle in improving the quality of economic growth is the high growth of fixed-asset investments. China's fixed-asset investment has been dynamic in recent years, rising 24 percent in 2006 over the previous year. The increase was 25.7 percent in 2005, and 26.4 percent in 2004.

In the first half of 2006, the fixed-asset growth rose by a whopping 29.8 percent in the entire country and a staggering 31.3 percent in the urban areas. And had the central government not pulled the brakes, the already overheated economy would have ended on a more scorching note last year.

Loose liquidity has fueled such growth, with financial institutions extending 3.18 trillion yuan ($413 billion) more in loans last year. The monetary authorities raised the bank reserve requirement ratio and the interest rate to deal with excess liquidity, and the government brought large-scale investment projects under control and raised the price of land earmarked for industrial use in the second half of 2006.

The measures brought down the fixed-asset investment growth from the second half of last year.

This year, however, fixed-asset investments are not expected to slow down significantly, Hu says.

That's because "many existing investment projects will continue this year", says Chen Xingdong, deputy managing director and chief economist of BNP Paribas Peregrine Securities.

Lehman Brothers economists, too, don't see a sharp drop "given the need to improve rural infrastructure and boost economic development in the mid-western regions".

Also, the World Bank has forecast that investment will remain relatively strong, even though it's quite a challenge to jazz up rural domestic demand.

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