The market-based managed floating exchange rate regime tied to a basket of foreign currencies is the "best choice" for China's socialist market economy, a central bank official said Sunday.

Yi Gang, deputy governor of the People's Bank of China (PBOC), the central bank, said at a research conference that China had always insisted on such an exchange rate formation mechanism.

He made the remarks while commenting on the finding of research on China's reform on currency regime, which focused on the impact of China's shift to a managed floating exchange rate regime in 2005.

The government would consider the timing and both the domestic and global economic conditions when pushing forward the reform of the regime, he said.

The research was carried out by experts from the Development Research Center of the State Council, State Administration of Foreign Exchange, Chinese Academy of Social Sciences, Peking University and the Bank of Communications.

It is appropriate to gradually reform the nation's currency regime, and a one-off revaluation is neither necessary nor practical, according to the research results.

The research discussed the impact of reform on China's macro-economy, foreign trade, capital flow, export-oriented industries, and the banking sector.

Lu Mai, secretary general of the China Development Research Foundation, said the valuation of the reform discovered many misunderstandings of the currency reform. He added that pressing the yuan to appreciate is not a way to limit China's competitiveness, and a stronger yuan will not have destructive influences on exporters and also on China's economic growth.

A gradual currency regime reform will not bring on inflation and asset bubbles, while a rising yuan will not cause losses in China's huge foreign reserves, he said.

Further, the currency regime reform had already solved the exchange rate imbalance, he added.

Lu also pointed out that the yuan's fluctuation has not had any significant negative impact on the banking industry, and it had also played a positive role in boosting the upgrading and transformation of China's export-oriented enterprises.

In fact, the ability of Chinese exporters to handle exchange rate fluctuations had been stronger than expected, he said.

On July 21, 2005, China abandoned a decade-old peg to the U.S. dollar by allowing its currency to fluctuate against a basket of currencies.

On June 19 of last year, the PBOC announced that it would further the reform of formation mechanisms of the yuan exchange rate to improve its flexibility. At the same time, it ruled out a one-off revaluation.