Faced with worsening fuel shortages in the country, China raised petrol, diesel and jet fuels prices by nearly 10 percent to about $76 a barrel to boost domestic supplies but its wholesale petrol prices are still lower than the international average of $102.

This means the Chinese government has to continue offering large amount of subsidies to refineries to cover losses they incur by selling oil at State-set prices. The government subsidized Sinopec, the nation's largest refinery company, to the tune of $1.2 billion in 2005 and 640 million dollars in 2006.

In the meantime, soaring oil prices add to the financial burden for enterprises and individuals, and likewise increase inflationary risks. China's consumer price index (CPI), a main gauge of inflation, rose 6.5 percent year-on-year in October.

The impact of the US subprime crisis and the renewed surge in oil prices have clearly increased downside risks, but the stronger growth momentum in the region is expected to carry through 2008, said Milan Brahmbhatt, the report's lead author.

The bank stood by its forecast for the galloping Chinese growth in 2008 of a slightly lower 10.8 percent and predicted only a moderately slowdown from 2007 in East Asia's economies growth in 2008.

According to the report, emerging East Asia experienced its largest increase in foreign exchange reserves during 2007. Forex reserves for the nine largest economies increased by $451 billion in the first nine months, reaching $2.5 trillion.

China claimed four-fifths of the regional reserve increase this year with $367.3 billion, as its total forex reserve has topped $1.43 trillion by the end of September.

As reported on November 7, the nation has set up a State forex investment company, China Investment Corporate Ltd (CIC), to mitigate the risks in its huge foreign exchange reserve.

The company, with $200 billion in registered capital and $208 billion from special treasury bond sale by the Ministry of Finance, would not buy into overseas airlines, telecommunications or oil companies, China's Vice-Minister of Finance Li Yong said on November 7.

It will use one third of its capital to purchase Central Huijin, which now controls China's major State-owned commercial banks, another third to replenish the capital of the Agricultural Bank of China and China Development Bank, and the remaining third to invest in global financial markets, he added.

A highlight of the WB report is that for the first time, the number of poor people living with less than two dollars a day in East Asia has fallen below 500 million, down from 1 billion in 1990.

In percentage terms this means the poverty head-count rate is estimated to have fallen to about 27 percent, down from 29.5 percent in 2006 and 69 percent in 1990, said the report.