Rigid controls on the yuan are making it more difficult for China's central bank to control the money supply and the surge in bank lending, which is fuelling an investment boom the government is trying to cool.

A record trade surplus, rising foreign investment and inflows of capital betting on a yuan appreciation have flooded the Chinese financial system with cash. The World Bank says failure to cool expansion and lending could lead to an abrupt slowdown in the world's largest consumer of copper, cement and steel.

Foreign Reserves

China's foreign exchange reserves doubled in the past two years, reaching US$941 billion at the end of June, more than the value of Russia's economy in 2005.

China's holdings, which overtook Japan's as the world's largest in February, could top US$1 trillion this year, according to economists at Standard Chartered Bank, driven by a trade surplus that may surge by half to a record US$150 billion.

Minister Jin reiterated the government's policy of "gradual" yuan reform, saying his country's economy is too small for any changes to the currency's value to balance global currency flows.

"China only occupies less than 5 percent of global GDP. I don't think the China exchange rate can play such a great role in the imbalances of the global economy," he said.

China's government has said it must avoid rapid fluctuations in the yuan's value because domestic financial institutions don't have enough hedging experience and too many exporters, operating on thin profit margins, would be put out of business.

"China will do it at its own pace, the way it suits them, and nobody else's," said Citigroup's Goetti.

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