THE International Monetary Fund estimated China's economic growth at 7.75 percent this year, down from its earlier forecast of 8 percent, and attributed the cut to weaker-than-expected global economic performance.

The IMF projection exceeded the 7.5 percent target set by the Chinese government and the 7.7 percent growth rate of China's gross domestic product in the first quarter.

"Despite weak and uncertain global conditions, the pace of Chinese economy should pick up moderately in the second half of the year as the recent credit expansion gains traction and in line with a projected mild pick-up in the global economy," the IMF said in a report today after its mission concluded a visit in China.

It said China's inflation may end the year at around 3 percent, and the external current account surplus is projected to remain broadly unchanged at around 2.5 percent of the country's economic output.

The challenges that China faces include the rapid growth in total social financing, a broad measure of credit which raises concerns about the quality of investment and its impact on repayment capacity, as well as high income inequality and environmental pollution.

"They are further signs that the current growth model needs to change," the IMF said, adding that Chinese authorities have recognized these challenges as the new government announced a set of reforms for 2013 to start addressing them.