Chinese Premier Wen Jiabao delivers opening remarks at the opening ceremony of the annual meetings of the Boards of Governors of the African Development Bank Group held in Shanghai, May 16, 2007. [Reuters]

China's Premier Wen Jiabao pledged to loosen controls on the exchange rate and take steps to curb a record trade surplus, a week before a summit in the US to discuss ways to reduce imbalances.

"China will gradually increase the flexibility of its currency regime," Wen said Wednesday at the African Development Bank's annual general meeting in Shanghai, without being more specific. "We'll take a number of measures to strengthen our control of the economy and to boost domestic consumption."

The yuan last week climbed the most since a decade-long link to the dollar was scrapped in July 2005, which may help US Secretary Henry Paulson argue he's making progress with China, as some lawmakers call for sanctions unless they see faster gains. Paulson will meet Chinese Vice Premier Wu Yi May 22-24 in Washington as part of the Strategic Economic Dialogue.

China's currency climbed 0.05 percent to 7.6830 per dollar as of 1:23 p.m. in Shanghai. The yuan has appreciated 1.6 percent this year, beating the Singapore dollar and the South Korean won.

"The pace of appreciation of the yuan has picked up, so China is aware of the reception they might get in the U.S," said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. "There's some window dressing here by China, as there is a risk of protectionist action in the US"

The US Commerce Department on March 30 levied duties on imports of coated paper to compensate for alleged Chinese subsidies to its exporters.

Wen's comments add to his Jan. 20 statement that China will further advance the pace of change in the foreign exchange market. China's central bank Governor Zhou Xiaochuan March 5 described yuan flexibility as "desirable" and said China may "gradually" widen the trading band.

"When Premier Wen says they should increase the flexibility, then it's important, as he's right at the top of the power chain," said Sean Callow, senior currency strategist at Westpac Banking Corp. in Singapore. "Paulson will be reasonably happy if we see 6 percent a year gains."