The report, which was published on Sept.3, comments positively on China's macro-economic conditions and fully affirms its economic policies.

Backed by appropriate macro-economic policies and structural reforms, China's economy has maintained a fast and healthy growth momentum, the report says. At the same time, China continues to promote a market economy and opening to the outside world, and has made progress in finance, banking and other critical sectors.

It predicts China's GDP growth for 2003 will exceed seven percent. With domestic demand recovering and price recovery in the international market, the deflation trend will begin to ease in the second half of this year, and the current account surplus will continue to remain at 1.5 percent of GDP.

Although the effective exchange rate for Renminbi has appreciated over six percent since 1999, China is still strongly competitive with the outside world, the report points out. By the end of June this year, China's foreign exchange reserves reached 250 billion US dollars, more than four times the amount of the country's short-term foreign debt.

The IMF also comments positively on China's reforms in financial, banking, statistical, State-owned enterprise reforms and other restructuring measures.

However, it cautions that China's economy also faces problems and challenges, a major one of which is how to achieve sustained fast economic growth while minimizing social cost.