Premier Li Keqiang's talks in Gansu province on Monday underscored his determination that the nation should rely on reform, rather than pump-priming, to promote sustainable growth.

To achieve sustainable and healthy development, the authorities should stick to rebalancing the economy while maintaining growth, employment and inflation within a reasonable range, Li said at a meeting in Lanzhou, the provincial capital, attended by provincial heads from the country's western regions.

"Fundamentally, the government must rely on reform to release the utmost benefits, spur market and social vitality, and enhance domestic potential to promote long-term sustainable and healthy development," he said.

With the economy heading toward its expected limits, reform is needed to coordinate policies and "make precise moves" to maintain steady growth, he said.

"The major tasks and targets of the government are to achieve a sustainable economy, improve people's lives and promote social equity," he said.

With the global economy still in slow recovery, the domestic economy has achieved progress, but certain problems have been growing and now loom large, he said.

As China's economy saw a prolonged slowdown over the past two years, the government resolved to rebalance its outdated growth model, which is overly reliant on investment and exports.

Despite the protracted slowdown, the authorities have so far refrained from initiating a massive stimulus program to lift the economy, and have allowed leeway to proceed with structural reforms for the long-term good.

Since taking office in March, the new leadership has announced concrete reform plans, including delegating administrative power to lower levels and easing controls in the financial sector.

On Monday, People's Bank of China Governor Zhou Xiaochuan said the economy will not experience persistent slowdowns, an indicator that the bank is ready to free long-awaited deposit interest rates, a key step to fully liberalizing the financial markets.

On July 19, the central bank announced the lifting of controls on bank lending rates in a clear signal of the government's determination to push forward market-oriented reforms.

Labor costs rise

As China's eastern regions are losing strong growth momentum due to rising labor costs and a saturated market, Li demonstrated through this trip his confidence that western regions, comprising more than half of China's territory and home to almost one-third of the population, could become the nation's new growth engine.

He believes that the wealth gap between rural and urban areas, as well as the gap between coastal and inland regions, provides potential for growth.

The government is mulling "differentiated" policies for the region that will feature huge spending on infrastructure, Li said.

"We will roll out more preferential policies tailored for the western region concerning infrastructure projects, to accelerate the construction and upgrading of rail and road networks," he said.

The western provinces should also step up the fight against poverty, as they are home to more than half of those living in poverty in the country.

To achieve all of these goals, "we must rely on deepening the reform and opening-up, and improving the market economy with socialist characteristics," he said.

Also on Monday, the State Council said in a statement that China will diversify railway fundraising methods and encourage private investment in railway construction as the ownership and management rights of intercity, suburban and branch railways, as well as railways for resource development, will be open to local government and social capital.

Guan Qingyou, assistant dean of the Minsheng Securities Research Institute, said directing private capital into the railway sector exemplifies the motif of Premier Li's governing policy: Try to unleash vibrancy from within and avoid resorting to external and additional stimulus.

Xu Hongcai, a senior financial researcher at the China Center for International Economic Exchange, a government think tank, said new investment plans announced recently, such as shantytown redevelopment, are just to make up for past shortfalls. They should not be considered part of a new stimulus package.

He said Li also showed signs that he would transform the role of government in investment, shifting from the "actor" role to the "servant" role, facilitating investment through delegating power, improving service and strengthening supervision.

Xinhua contributed to this story.