The G-7''s strongest call for change in four years of negotiating with China comes as Canada and Europe seem to have joined the US in complaining that an undervalued yuan is hurting trade balances.

Sharply divided over the risks posed by the euro''s climb to record levels against the dollar, badgering China may have provided US treasury secretary Henry Paulson and French finance minister Christine Lagarde with some common ground.

"In view of its rising current-account surplus and domestic inflation, we stress its [China''s] need to allow an accelerated appreciation of its effective exchange rate," the G-7 officials said in a draft of a statement scheduled for release after talks in Washington on Friday 19 October.

The G-7 reiterated that currencies should reflect economic "fundamentals" and that disorderly or excessive movements are "undesirable", says the draft. The governments will continue to monitor exchange markets and cooperate as "appropriate", it said.

Reviewing the world economy, G-7 officials said that the recent market turmoil, high oil prices and US housing recession will lead to more "moderate" global growth. But the draft noted that the world economy''s fundamentals remain strong, with demand from emerging markets providing "critical impetus".

Since first describing flexible exchange rates as "desirable" after a 2003 meeting in Dubai, the G-7 has increased pressure on China each year to appreciate its currency and value it on a trade-weighted basis.

China keeps the value of its yuan low by buying foreign currency to limit its appreciation. This is why the country''s trade surplus has jumped an astonishing 56 per cent this September from a year earlier. Inflation in China reached a 10-year high in August.

People''s Bank of China deputy governor Wu Xiaoling told a conference in Washington earlier on Friday that his country''s currency is moving in the right direction and that eventfully, other governments will be satisfied.

After four years of constant pleas to revalue the yuan, the US, Canada and the European Union are becoming impatient with China, because they are bearing the brunt of the dollar''s slide to its weakest levels since 1997.

The yuan has gained just 3.9 per cent against the US dollar so far this year, less than half the euro''s gain and a small fraction of the Canadian dollar''s 20 per cent surge against its US counterpart.

But Europe is even more concerned about the yuan falling 4.1 per cent against the euro, making China''s exports more competitive (and Europe''s exports to China less competitive). In the same period, the yuan has dropped a staggering 13 per cent against Canada''s dollar.