Beijing, Aug. 25 : 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.

"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," the China Daily quoted Xia Bin, an academic adviser to the People''s Bank of China (PBOC), China''s central bank, as saying.

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 dollars 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.

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. (ANI)