CHINA'S economy is expected to grow 10.7 percent annually in the second quarter, slowing from the surge of 11.9 percent in the first three months of this year, a government report said yesterday, reiterating that the economy is not overheated.

Thanks to robust domestic demand, China's economy will still expand rapidly in the April-June quarter. But the pace will slow from the peak growth in the first quarter due to a smaller rise in investment, according to the latest report by the State Information Center, a unit under the National Development and Reform Commission, the country's top economic planner.

"China has recovered solidly from the global financial crisis. The first-quarter gross domestic product climbed to a record 11.9 percent but it is mainly due to a low comparative base last year," the report said. "Excluding the low-base effect, the growth is still within a range of reasonable expansion, and the economy is not overheated as some analysts claimed."

Retail sales will continue to be stimulated by the "old for new" program which encourages consumers to trade in their used appliances, people's growing income and the World Expo 2010 Shanghai, the report said. The retail sales may rise 19 percent in the second quarter, up from the 17.9 percent increase in the first quarter, the report said.

Investment, however, will expand at a slower pace after China tightened credit to avoid economic overheating and curb a possible asset bubble. Urban fixed-asset investment is expected to gain 24.5 percent in the second quarter, lower than a rise of 25.6 percent between January and March.

Exports, badly hit by the global financial crisis, may climb 25 percent in the second quarter. Imports are seen to surge 35 percent.