CHINA READY TO APPLY MORE STIMULUS

BEIJING 25/7/2012--Chinese authorities have informed the International Monetary Fund that they are ready to do more to support the economy in the event of a large external shock, a senior IMF official said Wednesday.

Markus Rodlauer, Deputy Director of the IMF's Asia Pacific Department told reporters on a conference call that Chinese economic data may further deteriorate in the coming weeks and months, and the data needs to be monitored closely.

Measures undertaken to support the economy "have been calibrated so far mainly to remove the previous restrictive bias and not to engage in a broad new stimulus," he said.

"The authorities have taken their foot off the brakes, but they have not yet stepped on the accelerator in a major way," he added.

The IMF has changed its official stance on the yuan, and now says that it is "moderately undervalued," from its earlier view that the currency is "substantially undervalued."

On the call with journalists, Mr. Rodlauer declined to give an explicit estimate of the degree of undervaluation in the currency.

He also acknowledged that Chinese authorities disagree with the IMF's stance on the currency, saying they feel it is near equilibrium.

Underpinning the IMF's view is the possibility of a rebound in China's external imbalances.

"We are confident in our judgment that at current exchange rate and currency policies...it will be very likely that the current account surplus will go back up again."

To prevent such a scenario, the IMF believes that "continued gradual appreciation" of the currency will be needed in the coming years, he said.

Write to Aaron Back at aaron.back@dowjones.com