A senior World Bank trade official said in Beijing Monday it is not in China's interest to make a very big,sudden change in its currency exchange rate in the short term.

Uri Dadush, director of the bank's International Trade Department & Development Prospects Group, said any change should be made gradually.

The short-term issue for China is the question of the appreciation of the yuan in way that it does not adversely affect the country's banking system and domestic situation, said the official during a lecture in Beijing on global economic prospects.

But in the long term, "China needs to recognize that, as any large economy, the main concern of its monetary concern and fiscal policy issue should be on domestic balance," not on targeting the exchange rate.

He said most countries only have one good counter-cyclical instrument. In the case of the United States, it is monetary policy, and it needs to deal with both inflation and growth.

What lies behind the United States' benignly neglected dollar exchange rate, he said, is the fact that the United States does not worry about the dollar exchange rate very much.

"I think you will find that the European Union will also move in this direction, a direction where monetary policy cares much more about domestic inflation and growth than about the Euro exchange rate," he said.

This makes sense for a big economy whose exports are only 10-15 percent of the GDP (gross domestic product), said Dadush.

But China is in a special situation today, as its economy is growing very fast its exports account for a bigger share of its GDP, he said.

"But I have little doubt that the long term policy for China is to move to a flexible exchange rate to be determined largely by the market, even though it may take many years," he said.

China has adopted a gradual approach to the reform of the exchange rate of its currency despite pressures from outside China that the country should appreciate its currency.

Source: Xinhua