BEIJING (REUTERS) - China will step up "effective investment" in key sectors, including shantytown renovation and rural power infrastructure, to support growth, the cabinet said, even as it saw more positive factors in the economy.

The government will increase investment in transforming shantytowns and dilapidated houses, as well as boost investment in rural electricity infrastructure and grain storage facilities, the State Council said after a regular meeting.

The government will implement a three-year plan to renovate 18 million dilapidated urban houses and 10.6 million dilapidated rural houses, it said late on Wednesday.

"In order to continue to respond effectively to the downward pressure, advancing to resolve structural problems, we should seize the favorable opportunity of lower raw materials prices to develop 'bottlenecks'", the cabinet said. "Currently, positive changes in the economy are increasing."

More investment will be channeled into modern logistics, and urban transportation while the construction of water conservancy and railway projects will be quickened, it said.

The cabinet also pledged to deepen investment and financing reforms and lure more private funds into infrastructure projects China's economic growth slowed to a six-year low 7 percent in the first quarter as demand at home and abroad faltered, and recent data showed weakness persisted into the second quarter, putting more pressure on the government to step up policy stimulus.