HONG KONG, July 29 -- Senior resident representative of the International Monetary Fund (IMF) to China, Il Houng Lee, has said the Chinese economy was fundamentally "still very robust" and the IMF has maintained its projection of China's economic growth in 2010 at 10.5 percent.

In an interview with Xinhua in Hong Kong, where Lee was delivering a speech on economic outlook on Asia and China for 2010 at the invitation of the Hong Kong General Chamber of Commerce, Lee said China's economic slowdown in the second quarter this year was widely expected and could continue in the third and fourth quarters.

Lee also said the Chinese economy was faced with domestic and international uncertainties but there was room and flexibility for the Chinese government to fine tune its policies, if necessary in the future.

Lee's remarks echoed an assessment by the IMF Executive Directors, released on Tuesday, after an IMF mission had finished the annual consultation with China.

"Growth is expected to continue to be robust, ... Directors commended the Chinese authorities for their commitment to the G-20 framework for strong, sustainable, and balanced growth," the assessment said.

EXPECTED SLOWDOWN

Government statistics showed China's economy expanded by 10.3 percent year on year in the second quarter of this year, slower than the 11.9-percent growth in the first quarter and 10.7-percent increase in the last quarter of 2009.

Lee said good data in the first quarter showed strong spillover from the large stimulus package in 2009, and was partly because of a low comparison base from a year earlier. The Chinese property market was also very strong and maybe a little bit too strong.

In addition, the inventory cycle in the U.S. -- China's second largest trading partner -- was also imposing a fairly strong demand on Asian exports. "So everything was very favorable (for the first quarter growth)."

While in the second quarter, with uncertain domestic and international economic environment as well as government measures to cool down the property market, Lee said data in the second quarter was showing "some moderation of the Chinese growth, which is something that everybody should have expected".

Chinese Premier Wen Jiabao said on July 18 that the slowdown was "primarily a result of active regulation and control" and " China's economy, in general, is in line with the government's macro-economic regulation and control".

"And the outturn of the second quarter growth is actually very close to what we have projected earlier, so we basically maintain our growth outlook on China," Lee told Xinhua.

He also said the slowdown was expected to continue and GDP growth rate in the second half of the year would be slower than in the first half, which stood at 11.1 percent.

"The question is how much it will slow down. and that partly will depend on how self-sustainable private consumption is, what the property market will do and how fast the government will throw its fiscal stimulus," he said.

"We feel the growth momentum will slow in the second half, but not to the extent that we would raise our concerns," Lee said. "I think there will be graduate slowdown which is probably more sustainable growth pattern for China in the medium term. So we are sort of moving towards a steady growth pattern."

Earlier on Tuesday, the People's Bank of China, the central bank, said while it is possible for China's economic growth to slow, the chance for a "double dip" is seen as slim.

Current economic development has revealed signs of a slowdown in China's growth, though the economic fundamentals remain strong, the central bank said in a report posted on its website.

UNCERTAINTIES AND SUGGESTIONS

Lee said the Chinese economy was facing an environment that was very uncertain, domestically and internationally.

The U.S. economy, the world's largest, has uncertainties given a slowdown of its recovery, which was evidenced by recent data on the rising unemployment and falling house prices.

In Europe, there were uncertainties over the impact of the spillover, though very unlikely, from the GIPS from the entire EU, he said, referring to the sovereign debt crisis which had occurred in Greece, Italy, Portugal and Spain.

And the Chinese economy itself has uncertainties, such as the self-sustainable private consumption strength and the speed of the stimulus package which the Chinese government has implemented, said Lee.

He said the Chinese government has in recent years been working very hard to re-orientated growth strategy and to increase household income and promote private consumption.

It was a real challenges for China to "manage the rebalancing of the growth strategy, especially at the time when the global environment is very uncertain", said Lee.

He suggested "a gradual exiting" of the 2-year 4-trillion-yuan (5,900 billion U.S. dollars) stimulus package, introduced by the Chinese government in November 2008 to cope with the financial tsunami, and a slowdown in the credit growth.

China "should just let its life go through and phase out which will then continue providing needed fiscal stimulus to the economy, " Lee said.

The IMF assessment, which Lee had also participated in, suggested it was appropriate for China's 2010 budget to maintain support for a steady resumption of private demand.

There was "room for further reorientation of the stimulus package toward measures that promote private consumption, raise household income, lessen income inequality, and improve the social safety net, building on recent progress," it said.

The targeted reduction in broad money growth this year balanced well the need to provide continued support to the economy with the desire to safeguard the health of bank balance sheets, it added.

Chinese Premier Wen had suggested that the theme of China's macroeconomic policies in the second half of this year should aim to "maintain the continuity and stability of policy".