THE government's priority for the rest of the year is to rein in capital spending, relying more on monetary policy measures, than on administrative curbs, Vice Premier Zeng Peiyan said yesterday (Sep 10).

Addressing a meeting of the World Economic Forum, Zeng also reaffirmed China's determination to press ahead with currency reforms.

"The priority for the second half is to control the over-rapid increase in fixed-asset investment," Zeng said.

"We will try to rely less - or not at all - on administrative measures and mainly use economic and legal measures in our macro controls.

"That includes appropriately adjusting money supply and credit and taking comprehensive measures to mop up liquidity in the banking system," he added. "We will also improve the formation mechanism of the Renminbi's exchange rate."

China has raised lending rates twice since late April and twice increased banks' reserve requirements to cool an economy that grew 11.3 percent in the year to June, the fastest pace in a decade.

The Central Government has weighed in by tightening land-use and environmental guidelines for investment projects.

Growth has been fueled by an investment and credit boom fed by the big balance-of-payments surplus of around 10 percent of GDP.

Zeng said the government was determined to foster more environmentally friendly growth in order to reduce China's consumption of energy and natural resources as well as to curb pollution.

"We need to embark on a new type of industrialization mode to promote development in an environmentally friendly manner. We will accelerate scientific and technical progress and promote technological development," Zeng said.

China's current growth model was not sustainable, Zeng said.

Editor: Wing