"China's present economic situation is still sound," Chinese foreign ministry spokesman Tang Guoqiang asserted at a briefing here on Tuesday.

He said the 8 per cent economic growth target set by the government was attainable as a result of its revamped fiscal policies in the wake of the Asian financial crisis which crippled the economies of many neighbouring countries.

Tang's comments came in response to an article in the latest issue of The Economist, which said the huge bad debt in China's banking sector, sluggish exports and price deflation may indicate an actual growth rate of around 3-4 per cent.

The British magazine also said the slower growth compared with Chinese official statistics showing 7.2 per cent growth in the first nine months of 1998 amounted to a recession.

This month,China's State Statistical Bureau (SSB) said the gross domestic product (GDP) for the first nine months to September rose 7.2 per cent from the same period last year.

However, the Chinese economy has been bottoming out over the past few months, with the third quarter GDP growing 7.6 per cent, the SSB said.

Meanwhile, Chinese finance minister Xiang Huaicheng has stated that China's decision not to devalue the reminbi yuan was decided by current economic realities, especially the favourable balance of payments.

"It is by no means a political commitment," Xiang said and explained that economists say that devaluation only occured when there was an unfavourable balance of payments or when foreign exchange reserves are insufficient to regulate deficit capital accounts. "China is in neither situation," he said.

Wu Xiaoling, director of the state foreign exchange administration, said that China still has a surplus of both current and capital accounts and has a solid economic foundation for a stable yuanexchange rate.

From January to September, China's foreign trade surplus amounted to $35.3 billion and the actually used foreign direct investment amounted to $31.4 billion.

By the end of September, China's foreign exchange reserves rose to $141.1 billion, making China the second largest holder of foreign exchange reserves in the world after Japan.

"All the economic indicators in the third quarter suggest that the Chinese government's policy of creating domestic demand by increasing spending on infrastructure is working," official reports said this week.