Wen Jiabao, China’s premier, on Monday replied to countries pressing for a revaluation of the renminbi saying that they underrated the effect it would produce on Chinese companies and the global economy.

At the close of the National People’s Congress, Mr Wen introduced conditions that needed to be met before China could move to greater exchange rate flexibility, including financial and economic stability. Thouhg he added that any revaluation “could be unexpected,” he said.

Mr Wen’s comments provide evidence that China feels no urgency to revalue despite political pressure from the US and Europe.

China, which has pegged its currency to the US dollar since the mid-nineties, has faced growing claims that the level of the peg gives Chinese exporters an unfair trade advantage, according to Richard McGregor.

The government has long said it would implement a more flexible exchange rate regime, but has not provided the terms yet.

Mr Wen characterised the government’s as that to create a “market-based, managed, floating exchange rate” system. “Our goal has been to let market supply and demand determine the exchange rate,” he said.

The Chinese economy increased 9.5 per cent last year, according to the government statistics. But foreign investment banks, applying their own measures put growth at 11-12 per cent.

The government officials predict “about 8 per cent” growth in 2005 but it has substantially underrated output increase over the past two years.

Although the government would remain watching an investment surge, Mr Wen emphasized that the main problems were unsatisfactory food production and transport bottlenecks for coal and electricity.

During the NPC, the government announced a launch of a number of reforms in agriculture, comprising tax cut on farmers and increased funding for schools and health to rural areas.