China's currency is appreciating against the dollar at a welcome pace but its value should be allowed to rise more against other currencies, a senior IMF official.
An appreciation of the yuan would cushion the impact of rising import prices and help China deal with its top policy priority, which is to contain inflation, said IMF Deputy Managing Director Takatoshi Kato.
"The yuan is recently appreciating against the dollar at a faster pace than before and we of course welcome this move," Kato told Reuters in an interview. "But against the euro and the yen, the yuan has actually fallen," he said. "It is desirable for the yuan to rise faster on an effective exchange-rate basis."
China's currency issue, a centerpiece of previous Group of Seven finance leaders' meetings, was not in the spotlight at a gathering on Friday, although the G7 countries reiterated their desire to see the yuan rise faster.
The IMF said exchange rate flexibility was a useful tool for addressing inflation in countries such as China.
The United States and European countries have been pressing China to let its currency climb in order to cut a huge Chinese trade surplus with major trade partners.
Kato, in charge of overseeing countries in Asia and other regions, said China's economy was expected to sustain relatively high growth despite the fallout from a global economic slowdown.
That meant China should continue to focus on curbing inflation, which jumped to a near-12-year high of 8.7 percent in February, through further interest rate hikes, Kato said.
"The biggest interest for Chinese authorities is to curb inflation," Kato said. "China should make use of monetary policy steps as needed to meet this purpose."
With fresh signs of economic distress in the United States, the finance chiefs from the G7 -- the United States, Japan, Germany, France, Britain, Italy and Canada -- said on Friday that risks to the economic outlook were tilted to the downside and near-term prospects had weakened.
They also warned that while the performance of emerging markets has been a bright spot, these countries were "not immune from global forces."
The IMF expects China's economy to slow to 9.3 percent this year from 11.4 percent last year.
On Asia's economy as a whole, Kato said the region's economic fundamentals remain in relatively good shape despite the global credit squeeze.
Asia countries will continue to attract a steady inflow of funds as long as their fundamentals remained solid, he said, shrugging off the view that investors' decreasing appetite for risk could trigger a sharp outflow of funds.