The World Bank (WB) on Wednesday raised its forecast for China's 2007 economic growth to 11.3 percent from an earlier 10.4 percent, and said the country's macroeconomic prospects remain good.

China's gross domestic product (GDP) grew by 11.5 percent in the first half of 2007 from the same period last year.

The bank also predicted the galloping Chinese economy would slow down to 10.8 percent in 2008.

Wednesday's report held that China's macroeconomic prospects remain good. It said China's exports would continue to be competitive despite cost pressures, while profit and credit growth are high at home, with investment being likely to expand strongly and consumption expected to remain solid.

The report also said China's economic growth pattern remains unchanged, as continued strong external trade and an investment-driven recovery in domestic demand are still major factors behind the rapid growth.

According to WB's estimates, the net external trade has contributed more than a quarter to the aggregate growth, remaining at a high level as in the second half of 2006.

The trade surplus is adding to domestic liquidity and contributing to steady asset price increases, share prices in particular, said the report.

The main macroeconomic task emains containing the rising trade surplus, said the WB report.

The report held that China's consumer price index (CPI), which rose 6.5 percent from a year ago in August, is expected to gradually ease later in 2007 despite upward risks.

Data released by the National Bureau of Statistics (NBS) on Tuesday showed that the accumulative increase of CPI, a sign of overheating of the already hot economy, reached 3.9 percent in the first eight months, well above the annual goal of three percent set by the government for 2007.

The report said although the CPI has risen to a record 11-year monthly high, it is largely attributed to higher food prices.

Food prices ballooned by 18.2 percent in August, while prices of non-food products rose 0.9 percent, said the NBS.

The government has taken various measures to ease liquidity and prevent the economy from overheating, such as the planned issuance of 1.55-trillion-yuan special treasury bonds.

The Chinese central bank warned in its second-quarter monetary report that China's economy remains on the brink of overheating following another 12 months of soaring industrial output and money supply.

The WB also said the recent turmoil in the international financial markets triggered by the U.S. sub-prime mortgage problems is likely to have an adverse impact on the global economy.

It continued to say China is "well-placed to deal with a possible impact", although China would be significantly affected by an economic slowdown in key markets due to its heavy reliance on exports.

According to the report, a key challenge for China remains the restructuring of the growth pattern.

It calls for a package of economic policies, including monetary, fiscal and financial policies, to tighten liquidity, increase capital costs, limit investment growth and stimulate consumption demand while encouraging investment in services.

(Xinhua News Agency September 13, 2007)