Premier Wen Jiabao (center) talks to doctors and nurses at the Xinjing Community Medical Center in Changning District during an inspection tour of the city on Monday. He is flanked by Shanghai Party Secretary Xi Jinping (in black jacket) and Mayor Han Zheng. Wen said the central government will launch a basic medical care program in urban areas this year on a trial basis to help ease health-care expenses for people who aren't covered by the insurance system.

Chinese Premier Wen Jiabao promised yesterday to ease controls on the yuan's exchange rate and take additional steps to curb a record trade surplus.

"China will gradually increase the flexibility of its currency regime," Wen said at the African Development Bank's annual general meeting in Shanghai. "We'll take a number of measures to strengthen our control of the economy and boost domestic consumption."

His remarks came a week before a Sino-US summit in the United States to discuss ways to reduce imbalances. US Secretary Henry Paulson will meet Chinese Vice Premier Wu Yi next week in Washington as part of the Strategic Economic Dialogue between the two countries.

The yuan last week climbed the most since a decade-long link to the dollar was scrapped in July 2005.

The yuan gained on Wen's comments, closing at 7.6822 against the US dollar yesterday, up in value from the opening price of 7.6840. It has appreciated 7.2 percent against the greenback since the peg to the dollar was replaced with a link to a basket of foreign currencies.

"There are some problems," Wen acknowledged. "We face excessive liquidity, an imbalance in the balance of payments and rapid accumulation of foreign exchange. But we are taking measures to deal with these issues.

"We are fully confident and capable of resolving the problems and maintaining sustained, stable and sound growth of the financial sector."

Wen reiterated China's vow to let markets play a greater role in setting the yuan's value, which some critics say is "artificially low," giving Chinese exporters an unfair advantage.

"We are deepening reform of the foreign exchange management system to improve the mechanism for setting the (yuan) exchange rate and give greater scope to the role of the market," Wen said, without giving details.

China's forex reserves have soared to more than US$1.2 trillion - the worlds' largest. Among its efforts to deal with the surplus, China is pushing its companies to invest overseas.

Regulators last week began allowing banks to invest in foreign stock markets under the Qualified Domestic Institutional Investor program as one means of promoting outward financial flow.

Commercial banks can invest as much as 50 percent of their QDII funds in overseas stock markets.

"The reform will help dampen the attraction of the domestic stock market a little as investors can now also benefit from the global market," said Liao Qun, an economist at Citic Ka Wah Bank.

Editor: Yan