"We believe it is in the interest of China to implement more forcefully the exchange rate regime it gave itself last year and to let market forces determine things in China in a more clear way," IMF managing director Rodrigo Rato said.

"We believe that will help the shift of China to a pattern of growth in which domestic demand will play a (larger) and more sustainable role," Rato told an online briefing with Asian journalists from Washington late Thursday.

"So it's clear that right now what we see is not the need for a new system but the implementation of the system that was agreed."

China severed a decade-old link between the yuan and the US dollar in July last year amid complaints from the European Union, Japan and the United States that the weak yuan gives Chinese exporters an unfair advantage in the global market.

The world's major economies have said that the yuan should be allowed to seek its own value in the market, like the other major currencies, and not be kept artificially weak.

Since July last year, the yuan, which was revalued by 2.1 percent at the time, has made only very modest gains against the dollar, leading to persistent calls for more resolute measures to reduce China's trade surplus, especially with the US and Europe.

The yuan on Thursday rose to its highest level against the dollar since July 2005, climbing to 7.9522 against the US unit on the exchange-traded foreign exchange market, but that still represents a further appreciation of less than 2.0 percent.

Analysts said this reflected an overall appreciation trend amid speculation in the Chinese press that the central bank wants to see greater currency flexibility.

The rise also followed a move by China's central bank on August 18 to raise interest rates for the second time in less than four months in another effort to cool the nation's heated economy, which grew 11.3 percent in the second quarter.

"We believe that to have a currency that will reflect better the reality of the Chinese economy is a key question for rebalancing the growth pattern of China to a more sustainable (one) in which domestic consumption will be stronger than it is today and investment will be more efficient," Rato said.