China's gross domestic product (GDP) is expected to rise by 10.5 percent in 2006, the Chinese Academy of Social Sciences (CASS), a major official think tank, said in a report.

The CASS report, made available to Xinhua Wednesday, also forecast that the country's economic growth rate would slow to 10.1 percent in 2007, thanks to the government's macro control policies.

The National Bureau of Statistics had earlier estimated the country's growth in the first half year at 10.9 percent, the highest in recent years.

The report predicted that China's trade surplus will hit a new high of 158 billion dollars in 2006. It will drop to 123 billion dollars in 2007.

Sustained growth in China's trade surplus has led to a rapid increase in the country's foreign reserves, which are widely expected to break the one trillion dollar mark in October.

This has in turn cranked up pressure for a revaluation of the Chinese currency yuan. China's biggest trade partner, the United States, has threatened to slam punitive duties on Chinese imports if the yuan is not revalued.

The CASS report said oversupply in some industries has forced producers to seek bigger overseas market shares.

It suggested that China further reform its foreign exchange rate determination mechanism and overhaul its export tariff rebate system to check the growth of its exports.

Efforts to curb sizzling investment

China will maintain efforts to curb overheated investment in fixed assets throughout the second semester, according to the minister in charge of the National Development and Reform Commission (NDRC).

In his report on the NDRC website, Ma Kai said curbing excessive growth of investment and loans and reining in the trade surplus are major macro-economic objectives in the second half of the year.

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