UPDATE 1-IMF official-China must do more to rebalance growth

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WASHINGTON, July 6 (Reuters) - China will need to increase healthcare and pension coverage to help rebalance its economy away from the export sector, an International Monetary Fund official said in a speech released on Monday.

Takatoshi Kato, an IMF deputy managing director, said in a speech in Beijing dated July 3 that there were signs the economic downturn is bottoming out in some Asian countries, including China.

He said growth in Asia was likely to remain weak throughout 2009 and to pick up gradually in 2010. Updated IMF growth forecasts are scheduled to be released on Wednesday.

Kato said global demand for Asian-produced goods would remain "suppressed" for a while, and it was in China's best interest to permanently rebalance its economy toward domestic demand and away from exports.

"Rebalancing in this way will require concerted effort along multiple fronts," Kato said. "However, the permanent changes that are underway in the global economy, including the prospects of suppressed external demand for some time to come, make the need for reorienting the economy more essential than ever."

In the short-term, providing stimulus for domestic demand will be instrumental and there were already improvements underway in infrastructure and low income housing, he added.

Kato said households were motivated to save because of concerns over aging. One way to address that was to increase the range of savings vehicles, expanding health insurance, private pensions, and reforming healthcare and pensions in China.

"Lessening that desire for precautionary savings will require that policies are put in place to assure citizens that their needs will be provided for in old age," Kato added.

(Reporting by Emily Kaiser and Lesley Wroughton, Editing by Chizu Nomiyama)