China's economic development is facing unprecedented challenges amid worldwide financial uncertainties resulting from the risk of debt default by some developed economies, analysts said.

However, they predicted relatively steady, high growth for the world's second-largest economy in the long run, since the country still has considerable maneuverability in economic policy.

"The effect of high US sovereign debt is likely to reduce consumer demand, so China's exports may experience rapid decline in the coming months," said Xia Bin, an academic adviser to the People's Bank of China (PBOC), China's central bank.

The recent debt crisis in the United States signals an ongoing economic downturn, which may result in a long-run depreciation of the dollar, he said.

Xia believes that the Chinese government - the largest holder of US debt at $1.16 trillion at the end of June - is worried about the safety of its foreign exchange reserves.

He said the US may choose to stimulate economic growth by further increasing money supply, which is likely to negatively affect other countries, cause friction in the foreign exchange market and put pressure on the yuan. "Although appreciation may help curb imported inflation, the influence will be limited."

Sun Chi, an economist at Nomura Securities Co Ltd, said inflation will be more persistent than expected in the coming months, which will force the central bank to maintain tight monetary policies.

The August consumer price index (CPI) is forecast to be 6.1 percent, 0.4 percentage point lower than the 37-month high in July, said Lu Zhengwei, chief economist of financial markets at Industrial Bank Co Ltd. The figure may start to drop in November to as low as 4.5 percent, he said.

"The central bank may not raise interest rates again through the end of this year and monetary policy is unlikely to ease," Lu said.

According to a preliminary purchasing managers' index (PMI) released by HSBC Holdings PLC, the country's manufacturing activity rebounded slightly in August from the previous two months, but still indicated only moderate economic growth.

The PBOC adviser Xia said that China's high savings rate, urbanization and globalization can help the country maintain a relatively high growth rate in the long run.

Sun from Nomura Securities expected that GDP growth may ease slightly further in the third quarter and is forecast to be 9 percent for the whole year, compared with 10.3 percent in 2010.