Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), said Friday that although there was some impact from US sub-prime mortgage crisis on China, IMF still expected the Chinese economy to expand by 10 percent this year.

Strauss-Kahn made the remarks at a press conference one day after his arrival to Beijing, the first visit for him as as managing director of the IMF.

Focusing on concerns about the current situation for the global economy in his discussions with the Chinese officials, Strauss-Kahn stressed again that the fast-growing emerging economies like China and India could not "decoupled" from poor growth prospects in the United States and Europe, and immune from the financial crisis.

"The current financial crisis, which began in the United States housing market, is spreading to affect the real economy in the US and elsewhere," said Strauss-Kahn, noting that no region will escape entirely unscathed since both the industrial economies and the emerging economies are closely linked with trade and financial market.

But Strauss-Kahn also expressed his strong beliefs that despite impact from the financial crisis, the emerging economies like China and India are still full of vigor.

"We still expect China's economy to expand by 10 percent this year, and India's economy to growth by about eight percent." he said.

He called on emerging market countries to be ready to respond to the crisis and warned there were still challenges ahead for China in sustaining its strong economic performance.

Strauss-Kahn said China's most immediate priority was recovery from the effects of the recent severe winter weather that disrupted much of the country and caused a loss of life.

He said the Chinese government was also confronting several macroeconomic policy challenges, including preventing inflation from becoming entrenched, and rebalancing growth away from a heavy reliance on exports and investment towards consumption. Addressing social inequalities and improving energy efficiency were also priorities.

China's continued tight monetary policy would be important in containing investment growth and inflationary pressures, and the government's emphasis on reorienting the budget towards improving social services, including health and education programs, could help to reduce disparities and rebalance growth, he said.

The IMF had seen China's focus on financial sector reforms, and welcomed the decision to participate in the IMF's financial sector assessment program, which could help China to assess its financial risks and stability.

"We also welcome the Chinese authorities' objective of allowing greater flexibility over time," said Kahn in relation to exchange-rate policy. He praised China's exchange-rate reform as moving in the right direction.

But Strauss-Kahn also expressed the hope of seeing a faster pace of appreciation that would help address China's key economic challenges and contribute to global economic stability.

As he promised in his latest speech in India, Strauss-Kahn reaffirmed that he would continue his reform of the IMF, including the development of a new income model and reforms that would give greater representation to emerging economies.

"The international community is facing a challenging period ahead as the global economy and financial markets adjust to the recent turbulence and policymakers work to preserve economic and financial stability," said Strauss-Kahn.

"I am confident from my discussions here in Beijing that China will play a role in this effort commensurate with its growing importance in the world economy." he added.

Strauss-Kahn arrived in Beijing on Thursday after he met with the finance ministers of G7 countries in Japan and visited India.

Strauss-Kahn met with Chinese Premier Wen Jiabao on Thursday afternoon in Beijing and also held discussions with People's Bank of China Governor Zhou Xiaochuan.

(Xinhua News Agency February 15, 2008)