WASHINGTON, Dec 8: China should not worry about allowing a more rapid appreciation of its currency as the yuan’s 12 percent rise over the last two years has not dampened the economy or exports of the world most populous nation, the US Treasury said on Friday.

A higher yuan, it said, would not only provide greater confidence to investors and help address issues arising from China’s bloating trade surplus but also create price and financial stability in the country.

China freed the yuan in 2005 from a long-standing peg of about 8.3 to the dollar in favour of a trade-weighted basket of currencies, and has since allowed it to appreciate slowly, but steadily.

Ahead of twice-yearly high level talks between senior US and Chinese economic officials in Beijing next week, Washington has stepped up its push for a stronger yuan amid perceptions that Chinese exporters have an unfair edge on world markets with an artificially low currency.

It’s our view that even though the RMB (yuan) has appreciated since July of 2005 by a little shy of 12 percent, China does need to do more on appreciation of the currency, US Treasury’s special envoy for China Alan Holmer said ahead of the US-China Strategic Economic Dialogue.

The yuan -- which ended at 7.4004 to the US dollar at the end of Asian trading Friday -- is expected to feature prominently at the cabinet-level meeting to be led by Treasury Secretary Henry Paulson from the US side.

The need for appreciation now is greater than ever before and I think you would also see that while the currency has appreciated in China, their economy continues to be strong and Chinese exports are strong, he said.

Holmer said exchange rate flexibility would give China’s monetary authorities greater tools for price stability and financial stability.

If you have a currency that more accurately reflects market fundamentals, it would provide clearer market signals for individuals and companies that are making investments in addition to addressing the issues that they have with respect to the trade imbalance, he explained.

Paulson called Wednesday for an immediate revaluation of the yuan after Beijing announced moves to tighten monetary policy for the first time in a decade.

A more flexible currency is especially important now, when the risks of inflation are clearly rising in the Chinese economy, Paulson said.---AFP