Goldman Sachs, the U.S.-based investment bank, raised its forecast for China's 2007 gross domestic product from 9.8 percent to 10.8 percent after the country saw robust economic growth in the first three months.

China's economy expanded 11.1 percent in the first quarter of the year, compared with 10.4 percent in the fourth quarter of last year, according to the National Bureau of Statistics (NBS).

Goldman Sachs said in a report that the consumer price inflation of 3.3 percent in March has increased the possibility for the Chinese government to unveil economic cooling measures.

The inflation, the highest in more than two years, was well beyond the comfortable target of three percent set by the Chinese government for the year.

China added 1.42 trillion yuan of new loans in the first quarter, 44 percent of the 3.2 trillion yuan last year, according to statistics.

Liang Hong, chief China economist with Goldman Sachs Asia, said the surge in loans growth, investment, inflation and overheated equity markets may prompt the government to raise further the interest rates or the reserve requirement ratio.

She noted if the loans growth accelerates in the second quarter, the People's Bank of China, or the country's central bank, may use more administrative measures to rein in its growth.

Liang's concerns were shared by NBS spokesman Li Xiaochao, who told a press briefing on Thursday that China's economy faces the risk of shifting from relatively fast growth to over-heating.

He acknowledged that the Chinese government will take more small steps to ensure a stable and fast economic growth.

Source: Xinhua