WASHINGTON (AFP) China faces a key challenge of unwinding stimulus measures and easing credit expansion as it pushes ahead with rapid economic growth, the IMF has said.

The International Monetary Fund also said that a stronger Chinese currency following Beijings recent decision to let the yuan trade more freely would help the country shift from dependence on exports and investment to private consumption as the primary driver of growth.

The policy challenge now is to calibrate the pace and sequencing of exit from the fiscal stimulus and credit expansion, while making further progress in reorienting the economy toward private consumption, the Washington-based IMF said in a report after annual consultations with China.

The IMFs executive directors supported a gradual phase out of the fiscal stimulus in 2011, provided the current trajectory for the economy is maintained, the report said.

China in 2008 unveiled a 586-billion-dollar stimulus package along with big tax breaks to boost domestic spending as the global slump bit following a financial crisis stemming from a US mortgage meltdown.

The stimulus policies had sparked concerns of overheating and inflation, with even the government warning of overcapacity in some key sectors.

The IMF prodded China to take additional steps to cool its red-hot real estate market, including possible introduction of a property tax.

It also suggested broader financial market development to provide alternative savings vehicles for the people.

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