Yuan could rise a bit more quickly--China's Zhou

WASHINGTON, Apr 23 (Reuters) The head of China's central bank said reforms Beijing has put in place mean its currency can ''probably'' begin to appreciate a bit more quickly, but gradualism is still the guiding philosophy.

''Chinese economic reform always follows the philosophy of gradualism. (But) probably it can be a little bit faster,'' People's Bank of China Governor Zhou Xiaochuan told a small group of reporters on Saturday, referring to a rise in the yuan.

''I think that right now the speed of moving forward (toward greater foreign exchange flexibility) ... is OK. It's good for China,'' he said on the sidelines of the spring meetings of the IMF and World Bank.

The measured pace that China is moving on the currency front has frustrated the United States, where politicians say an undervalued yuan gives Chinese products an unfair advantage in global trade.

Asked if he had received any word of whether the U.S.

Treasury might name China as a currency manipulator in an upcoming report -- a step that would open the way for trade sanctions -- Zhou said: ''We don't worry too much (about) what ... the other people say.'' ''There are certainly always different voices,'' Zhou said, adding the U.S. Treasury understood Chian's approach.

He also said the very idea of deeming a country a ''manipulator'' was flawed. ''We don't accept the concept,'' Zhou said. ''This is not a clearly defined economic concept.'' Zhou said China was managing its rapidly growing foreign exchange reserves -- the world's largest -- ably, but sidestepped the question of whether it might consider diversifying away from U.S. dollar-based assets.

''I think China is among the best in managing our foreign exchange reserves. We get good returns,'' he said. While declining to be specific, he said the reserves were held in safe, liquid assets. ''We can adjust very quickly.'' Despite the good returns on reserves, Zhou said it was always important to watch developments.

''These things are very dynamic,'' he said. ''The world is changing; the foreign exchange market is changing. So, we also need to continuously improve ourselves based on the domestic economic situation and also based on the international market.'' Zhou also confirmed that rapid growth in China's money supply meant the central bank would have to take further action to clamp down on credit, but declined to offer any details on what might be under consideration.

''Money expansion is faster than we expect, so we should use some of monetary policy'' to slow it down, he said. He said, however, that first-quarter money supply and bank credit data were likely affected by seasonal factors and should not be used to draw definite conclusions on the underlying pace of growth.

REUTERS OM RAI0510