China’s economy will moderate over the next few years as Beijing looks to rebalance it, the World Bank says, but it has warned of risks from local government debt, a cooling real estate sector and an uncertain export recovery.

The bank’s Economic Update on China on Friday comes amid fears the Asian giant and driver of global growth is slowing too much, as the leadership looks to pivot towards private, domestic demand from a reliance on big-ticket government investment projects.

“China’s growth will continue to moderate over the medium term, and the structural shifts will become more evident,” it said.

The report pointed out that the world’s number two economy had shown signs of picking up in recent months thanks to government support measures, robust consumption and improving foreign demand, adding the recovery is likely to continue into the next two quarters.

The Washington-based lender forecast growth of 7.6 per cent this year, unchanged from its April estimate but lower than China’s actual growth of 7.7 per cent in 2013. Beijing’s own target for this year is 7.5 per cent.

However, it said there were dangers down the road, including from a disorderly deleveraging of local government debt, which could potentially trigger a sharp slowdown in investment – a key driver of the economy.

There were also problems facing the cooling real estate sector and and the export sector, the report added.

It noted that the latest estimate by the National Audit Office of local government debt and contingent liabilities in mid-2013 was 17.9 trillion yuan ($2.9 trillion).

That is 31.3 per cent of the overall economy last year and compares with 10.7 trillion yuan at the end of 2010, the report said.