BEIJING -- China's economy is weathering the global slowdown better than expected, the World Bank said Thursday as it raised its growth forecast for the country to 9.8 percent from 9.4 percent.

The World Bank cited the country's strong domestic demand and sustained competitiveness in exports as key strengths.

"Amid weaker and uncertain global prospects, China's growth will be supported by strong international competitiveness and a robust domestic economy," David Dollar, the bank's country director for China, told reporters in Beijing.

Just two months earlier, the World Bank had lowered its growth estimate for China to 9.4 percent from 9.6 percent on weakening demand for its exports.

The back-and-forth revisions reflect the uncertainties prevailing at a time when the US economic outlook remains murky due to the fallout from the mortgage lending crisis. They also result from a revision in China's own GDP growth estimate for 2007, which was raised by a 0.5 percentage points following the bank's most recent half-yearly report in early April.

"Global growth is on course to slow further and commodity price-driven inflation has become a complicating factor everywhere. These developments imply considerably more international uncertainty and risk," Dollar said.

"The upward revision to our growth forecast largely reflects revised GDP data showing stronger service sector growth," he said.

The World Bank's current forecast is for growth to slow to 9.2 percent in 2009.

China's economic growth had moderated to a more sustainable pace, which in part reflected less buoyant investment, but the country's domestic economy was holding up well, the WB report said.

It said most developing and emerging markets, like China, would outperform high-income countries as they were less directly exposed to the financial turmoil and would see a modest, orderly slowdown.

The Chinese government has set a growth target for this year of 8 percent following last year's sizzling 11.9 percent expansion.

The Washington-based bank said it did not expect the calamitous earthquake that struck southwest and central China last month, killing about 70,000 people, to have a significant impact on the wider, national economy.

However, it noted that reconstruction might actually boost growth in the months ahead.

The bank lauded China's progress in combating inflation, which fell to 7.7 percent in May from 8.5 percent in April. It forecast that the inflation benchmark, the consumer price index, will rise 6 percent for all of 2008.