The report from People's University in Beijing, in tandem with Shanghai firm Donghai Securities, said China will face challenges ahead from the weakening global economy.

"The slowdown in the global economy and rising inflation are essentially signs of an adjustment in the global economic cycle," said the report, which was published in the official China Securities Journal.

China's gross domestic product expanded by 10.6 percent in the first three months of 2008 from a year earlier, easing from 11.9 percent for the full year of 2007.

"The slowdown in economic growth in 2008 is not short-term temporary adjustment, it's the beginning of a downward section in the cycle," Liu Yuanchun, an economist with the university, told the paper.

The report expected China's consumer inflation rate to stand at 7.1 percent in 2008, sharply up from 4.8 percent in 2007.

The trade surplus this year is seen at 258.8 billion dollars, shrinking from 262.2 billion in 2007, the report said, citing a decrease in external demand and a stronger domestic currency as the main reasons.

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