In its quarterly forecast, the bank said it expected the world's third-largest economy to expand by 7.2 percent this year, up from a 6.5 percent prediction made three months earlier.

"Developments in the real economy have been somewhat better than expected three months ago. More importantly, bank lending in the first part of 2009 has been much larger than expected," the World Bank said.

"Government expenditure has also substantially outpaced expectations in the first five months. In this light, we forecast (economic) growth of 7.2 percent in 2009."

The World Bank said that without a massive government injection into the economy, its growth forecast for this year would have been little more than one percent.

And while predicting "respectable" growth in 2009 and 2010, it warned it was too early to say if a robust sustained recovery was on the way.

"There are limits to how much and how long China's growth can diverge from global growth based on government influenced spending, given that China's real economy is relatively integrated in the world economy," it said.

"Meanwhile, market-based investment is likely to continue to lag for a while because of the squeeze on margins amidst spare capacity in many manufacturing sectors."

China began to feel the impact of the global financial crisis in the second half of last year, and in response unveiled an unprecedented 580-billion-dollar stimulus package aimed at boosting domestic demand as exports dived.

The trade-dependent Chinese economy saw double-digit growth every year from 2002 to 2007, but it shrank to nine percent last year and just 6.1 percent in the first quarter of this year.

However, a growing body of evidence has given rise to hopes, both at home and abroad, that China could emerge from the global crisis earlier than expected.

"Our economy is at a critical moment as it steadily moves in an upward direction," Chinese Premier Wen Jiabao said in a cabinet meeting Wednesday, according to the state-run Xinhua news agency.

Robert Subbaraman, a Hong Kong-based economist with Nomura International, said more and more China analysts were raising their forecasts too.

"There has been a flow of Chinese data in recent months which has been generally stronger than expected," he said.

In May, for example, investment in fixed assets, much of it financed by the stimulus package, increased by more than 38 percent year on year, according to government data.

The World Bank argued that it was "not necessary or appropriate" to add more government stimulus for the rest of 2009.

"One reason is that the fiscal deficit is likely to be significantly higher than budgeted and additional stimulus now reduces the room for stimulus in 2010," the report said.

Wen said last week that shrinking fiscal revenues along with unemployment and falling exports were preventing a solid economic recovery from taking root, state media reported.

Looking into the next decade, the World Bank said Beijing may have to get used to less stellar growth due to a more permanent impact on its exports.

"We estimate that we may have to reduce our expectations of medium-term trend growth in China by two percentage points or so, which is significant but not catastrophic," World Bank economist Louis Kuijs told reporters in Beijing.

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