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China is falling short of its goals in a campaign to boost energy efficiency in its fuel-guzzling economy _ the world's No. 2 oil consumer _ but is starting to make progress, the government said Thursday.

China launched a five-year effort in 2006 to cut energy use per unit of economic output by 20 percent amid mounting worries about pollution and dependence on imported oil, which leaders see as a strategic weakness.

But last year's reduction was only 1.33 percent, well below the 4 percent annual target from China's 28-year-old economic boom, which has left its cities choking on some of the world's worst air pollution and millions of people without clean water.

"Cutting energy consumption and pollutant emissions and dealing with climate change are urgent, critically important tasks," Premier Wen Jiabao said at a government meeting this week, according to state media.

China's oil imports rose 11.2 percent in the first half of this year to 570 million barrels, the government reported this week.

Beijing has unveiled a series of initiatives to encouragd rebates of value-added taxes on exports of cement, plastics and other goods deemed energy-intensive or polluting. Last week, the government said companies that exceed pollution limits will be barred from receiving bank loans. Construction companies have been ordered to make new buildings more energy-efficient.

But China will have trouble meeting its goals while energy-intensive manufacturing still accounts for more than half its economic output and it needs high growth to reduce poverty, said Ting Lu, a Merrill Lynch economist in Hong Kong.

"China is not making good progress on this. The 20 percent target is good, but of course it's very hard to achieve that in five years," Lu said. "It's not a wealthy country."

Total energy consumption rose by 9.6 percent last year, the first time in three years it has climbed more slowly than the rate of economic expansion, Xie said. Revised figures issued by his agency this week put 2006 economic growth at 11.1 percent.

The government still needs to alter some pricing guidelines and regulations to bring them into line with energy-saving goals, Xie said, though he declined to give details.

The efficiency plan calls for China to reduce energy use from the equivalent of 1.22 tons of coal per 10,000 yuan (US$1,300; euro1,000) of economic output in 2006 to 0.98 tons in 2010.

Among China's 30 provinces and regions, only the city of Beijing met its efficiency goal last year, cutting energy use per unit of output by 5.25 percent, according to Xie. He said al at least 1 percent.

Xie said his agency had yet to compile figures for the first half of this year. But based on data from January to May, he said, "the situation should be much better than last year."