China's economy may have modest downslide after 2006, with its GDP growth to slow from the current 10.4 percent to 9.6 percent in 2007 and 8.7 percent in 2008, said a World Bank report on Wednesday.

The World Bank released its annual report -- Global Economic Prospects 2007 in Beijing on Wednesday, which gives a medium-term outlook for China's economy in a special section of regional economic prospects.

According to the report, continued robust investment demand and a pickup in private consumption should maintain China's GDP growth at high rates.

"China's economy remains favorable in the coming years," said Richard Newfarmer, the report's lead author.

According to the report, China's export growth rates are projected to decelerate toward 14 percent in 2008, lower than the estimated 20.3 percent increase in the year 2006, noted the report.

Richard Newfarmer said the modest slowdown is not a bad thing for China, which will help ease pressure on China's economic growth.

The report also said in the coming years, signs of overheating in China will be limited to specific sectors and regions. While production capacity continues to expand in line with demand, inflation remains low, and the current account is in surplus -- all of which augur well for a soft landing.

But the report also mentioned that high investment rates and excess capacity in several sectors dominated by state-owned enterprises will leave open the possibility of a sharp decline in investment.

The year 2006 witnessed China's efforts to contain its soaring investment for a balanced economy.

Rapid investment growth, and a surge in exports as new capacity came on stream, saw the Chinese economy expand by 10.7 percent year-on-year in the first nine months of 2006.

Investment demand in China was particularly strong in the first half of 2006, but the World Bank report said China's efforts to contain investment via tighter monetary policy and sector-specific administrative measures have resulted in a modest slowing of GDP in the third quarter to a 10.4 percent pace.

The World Bank report also said that robust expansion in credit and money supply, in part fueled by strong balance of payment inflows, helped support an acceleration in domestic demand, whose contribution to growth increased to an estimated 7.3 percentage points in 2006, up from 5.6 percentage points the year before.

During the first nine months of 2006, China's trade surplus increased to 110 billion U.S. dollars, already higher than the total for all of the 2005, and its international reserves have exceeded one trillion dollars.

According to the World Bank report, owing to years of annual export growth of more than 20 percent, China has overtaken the United States as the world's second-largest exporting nation during the course of this year.

Bert Hofman, World Bank's Lead Economist for China, told Xinhua that seeking both external and internal balance in economy is still a major task for China to do in the coming years. And China's 11th Five-year Plan is an important policy to readjust its economy for future sustained and healthy development.

He suggests China should pay more attention to environmental pollution, which is also a major challenge not only for the East Asia and Pacific region, but also for the whole world.

(Xinhua News Agency December 14, 2006)