The Carter administration, in response to repeated urging this week by Chinese officials, intends to recommend to Congress that China be granted Most Favored Nation (MFN) trade status, Treasury Secretary W. Michael Blumenthal said here tonight.

He said that the administration also would recommend that U.S. Export-Import Bank credits be extended to China to help stimulate bilateral trade.

After a meeting with Chinese Premier Hua Kuo-Feng, Blumenthal told reporters that additional progress had been made on all substantitive issues relating to normalization of economic affairs between the two countries.

Most Favored Nation (MFN) status gives a country a lower tariff schedule than that accorded countries without it, and the Chinese have made it clear from the start that they urgently need MFN treatment to increase their export potential to the U.S.

Equally, the U.S. has made it clear that the U.S. is willing to grant the Peoples Republic MFN treatment in the context of a bilateral trade agreement.

Blumenthal's comments indicated that China has come along in making the commitments that the U.S. deems necessary for a trade agreement. These include providing physical facilities that will help U.S. businessmen here, conformity with international rules regarding patents and trademarks, and nondiscrimination against U.S. goods.

Another "qualifier" for MFN treatment relates to the Jackson-Vanik Amendment to the 1974 trade act, which bars MFN to any socialist country that does not have a liveral emigration policy. Although this has frequenly been mentioned as a potential barrier to MFN status for China, it in fact has not been a serious impediment.

China's emigration policy at the moment would doubtless qualify it. For example, the U.S. has a Chinese immigration quota of 10,000 annually, and the emigration rate to the U.S. is running 2,000 a month. Thus, any real barriers to fuller Chinese emigration to the U.S. are embarrassingly on the U.S. side, not the Chinese.

The heart of the matter is that the U.S. wanted to make sure that all other requirements for MFN treatment would be met by the Chinese, so that the Soviet Union could not claim the PRC was getting special treatment.

Blumenthal made clear tonight that the actual decision to grant China MFN status had not been made, but he seemed to be edging closer to it. He also said for the first time that the MFN status would be part of the proposed bilateral trade agreement

Blumenthal also repeated the assurances he has given during the past three days here that the Sino-Vietnam war will be one of limited scope and duration -- at least according to the information given him by Chinese leaders Hua and Teng Hsiano-Ping.

He said he listened carefully today to chairman Hua's reiteration of the Chinese "limited war" posture, and had communicated the gist of Hua's remarks to Washington

So far as he can tell, he said, the economic negotiations have not been affected by all of the attention given to the hostilities.

But he conceded that if the war broadens, it could discourage businessmen, who make their investments on a long-term basis. "Obviously, if there were to develop a wider war here, that would have an impact on businessmen's attitudes and on the economic situation," he said.

Blumenthal plans to meet with a group of American businessmen here tomorrow, just before presiding at the opening of the American embassy.