The State Information Centre, a powerful government think-tank, has called on the Chinese government to consider a more flexible exchange rate in order to eliminate worldwide pressure for a stable currency and discourage the entry of speculative funds on China's economy, which could encounter a slow down by the year's second quarter.

In a report by the China Securities Journal, the influential state consultancy group believed that the world is expecting the Yuan to appreciate and "China should broaden the trading band before more hot money flows into China and leads to a serious situation that cannot be turned around."

The recommendation came out following calls from the US that China needs to adjust the value of Yuan in order to benefit the two nations in an interlinked global economy.

China's currency has been pegged to about 6.8 dollar since 2008 in support of the country's exporters during the global financial crisis but US and EU governments have been arguing that the policy renders a too weak Yuan, which China has been using to its advantage to flood the world with its cheap export products.

US trade representative Ron Kirk stressed that China is bound to benefit further by giving the US more room to save and sell, adding that "we are not trying to dictate to China what they should or should not do, but step back and take a more global look at their overall economic policy."

China, which is currently beset by billion dollars of US debt, would certainly benefit from the policy according to Mr Kirk as he asserted that "we would all be well served if the policy would provide to float to a better level."

The centre has also predicted that China's economy would expand further by 10.7 percent in the second quarter, giving hints that recent reforms announced by Beijing are producing good results with the backdrop of an 11.9 percent growth in the first quarter that critics fear may lead to overheating.

The government has issued orders to control bank lending and property prices and arrest any possible threats in the real estate market, as the centre released its estimates that the consumer price index would jump by 4.2 percent on-year in the second quarter owing to higher commodity prices and low base effect.