I solve this problem by editting the appcfg.cmd file under the Google App Engine SDK folder.
The appcfg.cmd file is located at
{eclipse directory}\plugins\com.google.appengine.eclipse.sdkbundle_1.8.8\appengine-java-sdk-1.8.8\bin
Change the java string in the command to the specific location of java.exe under jdk folder:
Original:
java -Xmx1100m -cp "%~dp0..\lib\appengine-tools-api.jar" com.google.appengine.tools.admin.AppCfg %*
After changing:
"C:\Program Files\Java\jdk1.7.0_45\bin\java.exe" -Xmx1100m -cp "%~dp0..\lib\appengine-tools-api.jar" com.google.appengine.tools.admin.AppCfg %*