Growing strains on the Chinese economy have prompted policymakers to review the conditions under which they might have to devalue the currency.

A government official said any decision to devalue the renminbi would depend on whether China could maintain acceptable levels of economic growth and social stability.

The Chinese authorities have consistently denied that devaluation was imminent.

However, the addition of caveats to the country's longstanding no-devaluation pledge gives the authorities more room to manoeuvre if economic conditions worsen or external conditions change.

The official said one external pressure would be a sharp depreciation of the Japanese yen.

China held its currency steady last year in the face of the Asian economic crisis, as it feared a devaluation would trigger further upheaval in foreign exchange markets. Some commentators still think a devaluation in coming months would prompt a fresh round of currency depreciations in the region.

The renminbi is not freely convertible and is kept in a tightly managed range about Rmb8.27 to the US dollar.

The softening of China's no- devaluation stance began in January when Mr Dai Xianglong, the central bank governor, said the country would devalue "only when there is a great imbalance in the balance of payments . . . and a great increase in the cost of exports". The government official added that if current policies failed to curb China's economic slowdown and rising levels of social discontent, then arguments for a devaluation would grow.

Devaluation would cause considerable pain in some sectors of Chinese industry, while aiding others.

Many economists, both Chinese and foreign, believe that Beijing does not want to devalue for several months or more. But some are starting to recognise that severe challenges facing the domestic economy this year may force the government's hand.