The World Bank on Wednesday raised its forecast for China's economic growth in 2009 to 8.4 percent, an increase of 1.2 percentage points from its previous forecast.

In its latest China Quarterly Update, the Washington-based lender said the country's gross domestic product growth is likely to remain robust, with large fiscal and monetary stimulus supporting a recovery in China's economy, which showed growth of 8.9 percent in the third quarter on the year.

The country is also on track to achieve its target of 8 percent GDP growth in 2009, it said.

"The monetary stimulus has been larger than expected," Louis Kuijs, the bank's senior economist for China, said at a press conference in Beijing. "China's GDP growth target now seems quite easy to achieve."

In the report, the World Bank said that China's exports, which had been a major drag on the country's growth, are likely to resume despite a slow global recovery.

This will be helped by strong fundamental competitiveness and the recent depreciation in the Chinese yuan's nominal effective exchange rate, it said.

This is the second consecutive time the institution had revised upward its forecast for China's economy.

In its June update, it credited the Chinese government's infrastructure-oriented $586 billion stimulus plan for the country's better-than-expected growth.

Wednesday's update warned, however, that the impact of the stimulus package will decline sharply in 2010 and investment in manufacturing will likely remain under pressure from spare capacity both domestically and abroad.

It added that China's recovery can only be sustained in the medium term by a successful rebalancing of the economy and called for greater emphasis on consumption and services, and less on investment and industry.

The report also warned about the risk of asset price bubbles and misallocation of resources as a result of abundant liquidity.

In a separate East Asia and Pacific Update also released Wednesday, the World Bank projected growth of 6.7 percent in 2009 for developing East Asia and the Pacific, and 7.8 percent next year.

In the half-yearly assessment of the region's economic health, the bank said the economic rebound in the region has been "surprisingly swift" thanks to large and timely fiscal stimulus spending in most East Asian and Pacific countries, led by China and South Korea.

Developments, however, remain strongly influenced by China, it said, with the projected increase in the country's 2009 GDP alone offsetting three-quarters of the combined decline in the GDPs of the United States, Europe and Japan.

Without China in the equation, developing East Asia is projected to grow at around 1 percent this year, with especially hard-hit countries like Cambodia, Malaysia and Thailand seeing their economies contracting.

"The rebound is yet to become a recovery," the update said.

Risks to a sustainable recovery in the region also remain, warned World Bank Chief Economist Vikram Nehru.

Calling on countries at the upcoming APEC ministerial meeting in Singapore next week to resist a return to protectionism, he urged them to take advantage of the growth potential ahead by pushing for more integration in East Asia.

Pointing out that the service sector in the region holds enormous potential, he recommended the countries introduce measures to spur competition in the sector.

Developing East Asia includes China, Indonesia, the Philippines, Thailand, Vietnam, Cambodia, Laos, Mongolia, Papua New Guinea and the island economies of the Pacific.