CHINA'S economy is expected to expand 7.6 percent in the second half of 2013, but risks of bad local government loans, slowing growth of central government revenue, diminished export competitiveness and industrial capacity are growing, according to a think tank report.

Economists have been cutting their forecasts for the world's second-largest economy following a string of weak data recently, with some predicting the government will not be able to meet its full-year target of 7.5 percent. China's economy expanded 7.8 percent last year, the slowest pace in 13 years.

At the same time, Chinese markets are struggling to recover from a crunch in the domestic financial markets that saw short-term money rates spike to record highs and stock markets swoon in recent weeks.

Investors feared the increase in rates, set off by the central bank when it refrained from injecting liquidity in recent weeks, meant China would tighten monetary policy to seize control of its shadow banking sector, which some fear is mis-allocating capital to speculative ventures such as real estate.

The report, which was done by an economic research unit at the State Information Center and quoted by China Securities Journal yesterday, said China's economic growth model was fundamentally stable.