The staff of the Los Angeles City Planning Department has submitted a recommendation that the city not ban chain stores from Chinatown, despite political pressure stemming from Wal-Mart’s decision to put a grocery in the neighborhood.

The department’s report found that the city general plan recommends a diversity of land uses in neighborhoods. In Chinatown, that diversity includes large retailers, so any ban would not conform to the city’s policies.

“Staff has not observed a proliferation of new (chain store applications) in the area, and limited staff research has indicated this issue does not appear to have the urgency that would call for such a temporary suspension of new permits,” the report states.

The report and recommendation go to the City Planning Commission for a vote Thursday.

Councilmembers Eric Garcetti and Ed Reyes proposed the ban in March after Wal-Mart Stores Inc. secured permits to open a 33,000 square-foot grocery, which the retailer calls Neighborhood Market, at Cesar Chavez and Grand Ave. in Chinatown. The proposed ban would prohibit any store larger than 20,000 square feet.

Larry Kosmont, president of government consulting firm Kosmont Cos., said it was refreshing to see a Los Angeles city department say no to overregulation of business.

“There were claims that Wal-Mart would hurt retailers, and now here’s their own planning department saying that threat doesn’t exist,” Kosmont said. “At some point, Los Angeles has to let the free market deploy to bring jobs and money into the community.”

Earlier this week, the Asian Pacific American Labor Alliance and United Food and Commercial Workers Local 770 filed a lawsuit challenging Wal-Mart’s permits for the Chinatown project, citing a lack of public notice before the permits were granted. The lawsuit asks the judge to stop construction of the store.