BEIJING, Oct. 29 (Xinhua) -- China's current account surplus rose 18 percent to 191.7 billion U.S. dollars in the first half of 2008, the foreign exchange regulator said on Wednesday.

    The surplus on the country's capital and financial account was 71.9 billion U.S. dollars, down 20 percent from a year earlier, said the State Administration of Foreign Exchange (SAFE).

    Aside from the twin surplus, the balance sheet revealed that the country's foreign exchange reserves was nearly 1.81 trillion U.S. dollars at the end of June.

    In a report issued on Wednesday, SAFE said China's economy was generally on a sound track and warned risks of a global economic slowdown were increasing with the U.S. real estate market continuing a downward trend.

    It said the government should stick to the flexible and prudent macro-economic policies and create a good environment for pursuing the balance of payments.

    The regulator also warned of rising inflationary risks globally, which would add to difficulties of macro controls among emerging economies.

    It pointed out uncertainties remained in the financial market and investor confidence was still weak, as a result, there could be dramatic fluctuations in the stock, bond, foreign exchange and commodity markets in future. Meanwhile, the possibilities of an economic recession was increasing as housing prices might keep falling.