Speaking on the sidelines of a bimonthly meeting of central bank governors from the G10 industrialized nations and major emerging markets, Li also said China will closely monitor inflation although the domestic economy is not overheating.

Asked by reporters whether there was an imminent plan to revalue the yuan, Li said: "No ... I don't think there is pressure."

Asked if he thought the yuan was correctly valued now, he replied "Certainly I do."

The yuan, also known as the renminbi, is pegged at about 8.28 to the dollar.

Speculation has swirled that China would soon make good on its longstanding plan to let the yuan trade in a wider range. Most economists expect the currency would rise if it were cut free.

China has repeatedly said that it would further reform foreign exchange regimes. The country has already relaxed foreign-exchange curbs, including allowing some service firms to retain more foreign exchange earnings and made it much easier for multinationals to deal in hard currency.

Watching Inflation

As part of financial sector reform, China has been pushing the "Big Four" state banks to whip operations and assets into shape before global banks gain near unfettered access to the Chinese market by late 2006 in line with World Trade Organization commitments.

On China's reform progress, Li said: "It could be a very long process, or short process, depending on all the preparations for the reform and how good work we can do for the next couple of years. (The reform progress is) so far so well."

China already has injected US$45 billion in foreign exchange reserves into two big state banks.

On the Chinese economy, he said: "I don't think the Chinese economy at this point is overheated ... certainly in several sectors ... cement, some industries, are overinvested, and we've already taken actions and measures to mitigate those problems. So far we've observed the outcomes we've expected."

"Inflation is something we are going to watch very closely."

Speaking last week, Guo Shuqing, China's head of foreign exchange and also a central bank vice governor, said inflation was still relatively mild and under control, though there was a need to give attention to "asset bubbles."

(China Daily March 8, 2004)