International Monetary Fund directors, according to a summary of their recent analysis of the Chinese economy, also agreed that circumstances were favorable for greater exchange rate flexibility.

They concluded that this year’s reduction in a stimulus package introduced in 1998 was appropriate. But several Fund directors said it would be prudent to leave options open for additional government expenditures “since the recovery is not yet well entrenched."

The IMF however praised authorities “for their skillful macroeconomic management, which has helped China to successfully weather the Asian crisis, and for pressing ahead with different structural reforms."

They cited a greater recourse to bankruptcy procedures, stronger management incentives and improved corporate management.

A rebound in economic activity in late 1999 after a slowdown the previous year has continued so far in 2000, with real gross domestic product (GDP) expanding 8.2 percent in the first half in response to buoyant exports, private consumption and stimulus spending.

For the year as a whole the IMF projects grow 7.5 percent, with consumer prices expected to rise just 0.5 percent.

Looking ahead, IMF directors called for measures to shore up the financial sector, calling in particular for commercial lending practices to guard against the emergence of non-performing loans.

They stressed the importance of limited government involvement in lending decisions and the need for better internal banking controls and improved legal and accounting practices.

(Xinhau)