The World Bank Wednesday raised its forecast for growth of China's gross domestic product (GDP) in full-year 2010 to 10 percent from its previous estimate of 9.5 percent.

In its latest China Quarterly Update, a regular assessment of China's economy, the World Bank predicted China's GDP growth in 2011 to slow to 8.7 percent and then ease further over the medium term.

Pushed up by higher food prices, inflation may stay above the government's 2010 three percent target for a while, the report released Wednesday said.

Chinese growth has moderated, with a shifting composition of decelerated investment, urban consumption and imports, as the effects of the stimulus package fade and monetary policy is normalized, it said.

According to data released by the National Bureau of Statistics last month, China's GDP growth rate slowed to 9.6 percent in the third quarter but was 10.6 percent for the first nine months of the year.

The World Bank said China's economic prospects are sound but that risks remain.

"Growth may ease a bit further as global growth decelerates and the macro stance is normalized but it remains supported by the traditional growth drivers and a robust labor market," said Louis Kuijs, a senior economist of the World Bank in China.

The World Bank said global growth prospects are fairly favorable due to emerging market strength but warned that risks include a weaker outlook in high-income countries.

China's consumer price index (CPI) in September accelerated to 3.6 percent year on year, a 23-month high.

"Further normalization of the macroeconomic stance is needed to guard against macro risks," said Ardo Hansson, lead China economist for the World Bank.

According to the report, international liquidity is a challenge to China's monetary policy but that the challenge is more manageable in China than in some other emerging markets.

"Measures can be taken to enhance protection against unwanted capital flows," the report said.

The report said said changing the economic growth pattern in also important.

"China is facing two main challenges in the next five years: One is realizing sustained rapid economic growth. The other is quality of economic growth," said Kuijs.