The Chinese economy is expected to grow at rates above 10 percent over the next two years, the Organization for Economic Cooperation and Development (OECD) said Thursday.

In an annual global survey, the Paris-based group said China's Gross Domestic product (GDP) would increase by 10.4 percent in 2007 and 2008, with domestic demand set to keep expanding.

The inflation rate will drop to 2.5 percent, down 0.3 percentage points from last year, the 30-nation group said in its Economic Outlook.

The OECD added that China's consumer price index (CPI) in 2007 and 2008 will stand at 1.8 percent and 1.5 percent respectively.

The current account surplus, the broadest measure of trade, should rise to 314.6 billion U.S. dollars this year and to 368 billion dollars in 2008, 10.2 percent and 10.6 percent of China's GDP respectively, said the report.

It added that the growth rate of China's exports may decrease due to slower world demand and the stronger Chinese currency, the RMB, over the next two years.

However, an increasing consumption capacity in China's rural areas and the revitalized real estate sector would rapidly expand the domestic demand, the report said.

The Chinese economy surged 10.7 percent in 2006, the fourth consecutive year of double-digit growth.

In March, Chinese Premier Wen Jiabao said in a government work report that China plans to gear down its economic hike to 8 percent this year.