EXECUTIVE Vice-Premier Mr Zhu Rongji yesterday rejected Western claims that China's bold drive to mix its socialist system with market economics was full of contradictions. Remaining optimistic about the economy in the long-run, he conceded there was a threat of overheating as the country was heading for a 10 per cent economic growth rate this year, as against eight per cent as earlier predicted. In a lengthy address to an International Interaction Council conference held in Shanghai, the reform-minded leader also spoke at length on China's foreign policy, which has been handled directly by the premier, Mr Li Peng. Mr Zhu told a discussion group of 35 former heads of state he was aware of remarks made by ''foreign friends'' that it was contradictory to insist on socialism on one hand while developing a market economy. But he disagreed, saying the crux of the issue was ''whether China will be able to establish a market economy while keeping public ownership as the dominant form of ownership''. Mr Zhu said he was ''firmly convinced'' that China could succeed. The Vice-Premier, who is now in charge of the State Council's day-to-day operations was confident China's economy could be improved by streamlining the responsibilities of owners and operators of enterprises, which he said was a main feature of market economies. The central Government would continue to reduce government intervention and price controls to give market forces full play in the economy, he said in New China News Agency reports. But he conceded that signs of overheating had emerged. ''Some friends abroad fear that China's economy may become overheated and doubt that the current growth rate can be sustained,'' he said. ''Their concern is understandable, and it is also a major concern to myself. ''Over the past six months, industrial growth has been too fast, investment has heated up, inflationary pressures have gradually accumulated, financial and monetary markets have grown tight, and disparity between regions in terms of economic development has widened. Indeed, there is a danger of macro-economic imbalance. ''Although these phenomena are not yet uncontrollable or unbearable, the Chinese Government pays great attention to them.'' He said the Government had adopted more prudent financial and fiscal policies this year and would readjust macro-level control over the economy when necessary. Noting that China's economy had entered a stage of rapid growth, Mr Zhu was confident growth would be sustained over a longer period because of a strong foundation built in the past 14 years.