Chinese exports have soared this year

In a key report, the OECD said it believed domestic demand would improve in 2006-7 while China would continue to increase its share of global trade.

But it advised China to further loosen its exchange rate to curb its current account surplus and quell inflation.

China has been criticised for keeping the yuan's value artificially low.

Expanding fast

China is likely to continue to increase its share of world trade, albeit less rapidly than in 2005 OECD report

The Chinese government let the yuan appreciate slightly against the US dollar early this year but is facing widespread calls for further action to tackle growing international trade imbalances.

Publishing its latest global economic analysis, the OECD said it believed the Chinese economy would see annual growth of 9.3% in 2005, rising to 9.4% next year and 9.5% in 2007.

"Despite the rise in the exchange rate and the brakes imposed on textile exports by a number of economies, China is likely to continue to increase its share of world trade, albeit less rapidly than in 2005," the report said.

Government efforts to prevent the economy from overheating had been partially successful, the report noted.

State-controlled spending, particularly in construction, had eased.

Currency concerns

However, the economy is increasingly being driven by substantial private sector investment, enabling it to maintain its high growth rates.

This, allied to a slowdown in import growth, has resulted in a sharp rise in China's current account surplus - forecast to double in 2005.

The OECD said China should let its currency rise further as a way of keep the surplus under control and checking inflation.