The IMF chief has urged China to allow greater flexibility in its currency regime and open up other sectors of the economy to market forces.

A Chinese woman holds a handfull of yuan banknotes. The IMF chief has urged China to allow greater flexibility in its currency regime and open up other sectors of the economy to market forces. [AFP]

"Our opinion is that they should allow that (exchange rate) regime to operate more fully," Rodrigo Rato, managing director of the International Monetary Fund, said at a press conference.

"I think what the Chinese economy needs is to have market forces determine supply and demand in a more efficient way in not only the value of the exchange rate but also in the allocation of credit, allocation of investments," he said Thursday.

Rato was in Singapore to attend a conference on regional financial integration involving finance ministers, central bank governors and officials from 13 Asian economies.

China is under renewed pressure to allow greater flexibility in its currency regime almost one year after Beijing revalued the yuan and ended its pegged currency system.

The yuan has only appreciated marginally against the US dollar, triggering a backlash especially from Washington that Beijing is deliberately keeping its currency undervalued to gain an unfair trade advantage.

The US trade deficit with China ballooned to 202 billion dollars last year, according to US figures and Washington says this imbalance, caused by an undervalued yuan, cannot be allowed to continue.

Earlier this week, China's central bank reiterated its longstanding pledge to boost the flexibility of its currency this year but said it would also ensure the yuan remained stable at a reasonable level.