The World Bank made the adjustment in its quarterly update on the Chinese economy, while also warning about growing signs of inflation.

"The slowdown in the global economy should affect China's exports and investment in the tradable sector," said David Dollar, country director for China, in a statement.

"However, the momentum of domestic demand should remain robust and a modest global slowdown could contribute to rebalancing of the economy."

The World Bank noted that the Chinese economy slowed down towards the end of 2007, mainly because of weaker exports.

"If the global slowdown will be more pronounced, China is in a strong macroeconomic position to stimulate demand by easing fiscal policy or credit controls," the World Bank said in the statement.

China's economy, the world's fourth largest, expanded by 11.4 percent in 2007, reaching a 13-year high.

Inflation is also at the highest level in more than a decade, mainly because of a spike in food prices, which so far does not seem to have spilled over into general inflation, the World Bank said.

"The inflation concerns call for relatively tight monetary policy," said Louis Kuijs, senior economist and main author of the quarterly update.

The Chinese government's options are limited, however, since it cannot cut interest rates too much amid concerns this would trigger more capital inflows and boost liquidity.

China is trying to curb liquidity, which is seen as too high and contributing heavily to surging asset prices, especially real estate.

"Monetary policy will continue to rely on credit controls and liquidity management," the World Bank said.

"Continuing to appreciate the (Chinese currency) against the US dollar will help dampen inflation pressures and reduce the current account surplus," it said.

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