Investment boom

Even though consumer spending is playing an increasing role in economic growth, fixed asset investment remains the biggest contributor to growth. China's economy is expected to expand 11.5 percent this year, fuelled mainly by investment which rose 27 percent in the first 10 months.

Due to strong domestic demands and soaring energy prices on the international market, a large portion of the investment is going to such high-energy-consuming and pollutant-discharging industries as construction materials, petrochemicals, chemicals and nonferrous metals.

Investment in these four sectors grew at a blistering 42.9 percent on average in the first ten months - a reason why China finds it difficult to meet its saving-energy and reducing-emissions targets.

"The risk of overheating lingers as investment still faces great upward pressure," said NDRC head Ma Kai. "The situation of saving energy and reducing emissions is still grave."

Last year, energy consumption fell 1.33 percent, only a third of the annual goal of four percent. Both emissions of sulphur dioxide, a cause of acid rain and chemical oxygen demand (COD), a measure of water pollution, were increasing.

Of the 30 administrative regions with figures available, all but Beijing missed the 2006 target of reducing energy consumption. To gear up for the Olympics next year, Beijing achieved a 5.25-percent drop.

A total of 12 regions, mostly those relying heavily on heavy industries and fixed asset investment, cut their energy consumption by less than three percent.

The failure made it even more difficult to meet the five-year targets and China must accelerate its industrial restructuring, said Xie, adding that some regions are still pursuing economic growth as a mandatory objective, at the cost of the environment.