China has a "window of opportunity" to adopt a flexible exchange rate, International Monetary Fund managing director Rodrigo Rato said today.
Chinese authorities have told the IMF they are prepared to move toward a gradual loosening of their exchange rate policy and were technically prepared to do it, Mr Rato said.
"Right now it depends on the political will . . . of the Chinese authorities to choose the right moment," Mr Rato told a business conference in Madrid.
A pegged yuan has fuelled China's export boom but it has also caused tension with the United States and other trading partners who complain that currency is undervalued by as much as 40 per cent.
Beijing is under pressure from the West, and Washington in particular, to let the yuan rise.
Mr Rato also referred to the US budget deficit in his speech and said it was a positive move for the government to have set a target of halving the fiscal gap in five years, but he said the target needed to be "more ambitious".