The Chinese Communist Party's leadership has come out with an economic policy for the second half of this year that aims to reduce inefficient production capacity in the country.

China's state-run Xinhua News Agency says President Xi Jinping presided over a meeting of the Political Bureau of the party's Central Committee on Tuesday.

Xinhua says the participants decided to strengthen the mechanism of the market economy, where more competitive businesses will survive. It also says the policy is designed to prevent excessive domestic competition.

The decision comes amid moves among Western countries to impose additional tariffs on electric vehicles from China. They cite excessive production by Chinese makers. All eyes are on to what degree the Chinese government can put the policy into practice.

The participants also hammered out a policy to push ahead with the purchase of unsold homes to address the real estate recession.

They also decided to help boost spending in areas such as tourism and nursing care to increase domestic demand.

The Chinese government has set a target of achieving an economic growth rate of around 5 percent this year.

But the figure remained at 4.7 percent in the three months from April to June this year, compared to the same period last year.