By Carol Giacomo

WASHINGTON, June 2 (Reuter) - President Bill Clinton on Friday extended favourable trade benefits to Beijing for another year despite continued problems with China in areas he once said mattered, drawing fire from human rights activists.

Although insisting the decision was not linked to recent tensions with China over Clinton's decision to let Taiwan's president visit the United States, U.S. officials hope renewal of Most Favoured Nation (MFN) trade status will help stabilise deeply troubled Sino-American relations.

The announcement stirred passions at home, with activists arguing the worsening state of human rights in China over the past year had proved Clinton's 1994 decision to renew MFN without regard to rights issues was a mistake.

"Once again the president has chosen trade over human rights," said Mike Jendrzejczyk of Human Rights Watch/Asia.

"By giving MFN unconditionally and announcing no new human rights initiatives, Clinton has undercut the pro-democracy movement in China that is now under attack," he said.

Human rights concerns in the past had jeopardised the trade status and the favourable tariffs for Chinese goods that it confers, but Clinton last year disassociated the issues.

He faced a roadblock with China on human rights and did not want to have to end the favourable tariffs which help foster trade with what may become the world's largest economy.

In formally announcing the MFN renewal, which for China comes up every June 3, senior U.S. officials made clear they are unhappy with the human rights situation there.

But they said the only legal criteria for renewing MFN concerns freedom of emigration and "China continues to allow free emigration and open travel overseas."

Still, "...we find China's record on human rights unacceptable," White House spokesman Mike McCurry said.

"China continues to deny its citizens freedom of speech, association and religion and fails to guarantee humane treatment of prisoners. Extrajudicial arrest and detention remain common practices," he said in a written statement.

At a State Department briefing, Assistant Secretary of State Winston Lord, the administration's top China expert, acknowledged that last year's controversial decision to disassociate MFN and human rights had not wrought progress.

There has been no movement on U.S. demands for religious freedom for Tibet and a recent roundup of dissidents "has been particularly discouraging," despite Beijing's earlier hints that separating MFN and rights would aid improvements, he said.

"We're firmly convinced it was the right decision for our overall relationship...and that if we still had linkage we would not be any better off on human rights," Lord said.

Jendrzejczyk faulted Clinton for not calling for the release of prominent dissident Wei Jingcheng or announcing he would raise China right's record with the G7 group of industrialised nations in Halifax later this month.

Clinton will send Congress his MFN determination. Renewal is granted automatically unless Congress votes to disapprove.

Some congressmen want to tie rights concerns back to the MFN decision but the White House did not expect this to succeed.

"We remain convinced that the broadest possible engagement with China offers the best opportunity over the long term to ensure that China abides by internationally accepted norms," McCurry said.

China reacted angrily, cancelling visits and arms talks, when Clinton last week dropped a long-time ban against allowing President Li Teng-hui of Taiwan to visit his alma mater, Cornell University in Ithaca, New York, this month.

Lord said the convergence of events was happenstance and Clinton's MFN decision was not an attempt to appease Beijing.