He acknowledged that since early August, there has been a sudden renewal of rumours that yuan will be devalued and described it as an `abnormal phenomenon' considering that China's economic situation has not changed.

"It is well known that China's balance of international payments remains strong, that the internal economic structure and economic fundamentals have not changed significantly, and that no new factors affecting the exchange rate of the yuan have emerged," Li was quoted by the official Xinhua news agency, at a seminar here, on the Asian financial crisis and the development of financial markets.

Li stressed that China's foreign debt structure was reasonable and its huge foreign exchange reserves, which were valued at over US $140 billion at the end of June, have provided a firm backing for the yuan's stability.

People's Bank of China's vice governor Liu Mingkang, the country's apex bank, said at the seminar the Asian financial crisis has posed a rigorous test for the sustained and stable development of China's economy.

"While actively drawing lessons for the Asian financial crisis, China is also resolutely pushing ahead financial reforms to prevent and ward off financial risks," he said.

Liu said, China will take steps to prevent a `bubble economy' during periods of rapid expansion, and will take care both domestic and foreign investment would be directed to sustainable growth projects and prevent excessive increases in stock and real estate prices.

Liu said China will gradually achieve currency convertibility under the capital account.

"A stable and efficient domestic banking system, a balanced macro-economy and a mature domestic capital market are the pre-requisites for capital-account convertibility," Liu said.

The exchange rate of a currency should be decided in accordance with the soundness of the balance of international payments as well as that of the macro-economy, he said.

"Overall, the crisis has had a direct impact on Chinese exports and the potential to inhibit China's efforts to raise funds overseas and on foreign direct investment in China," Liu acknowledged.

China's export growth has slowed since January, with total exports rising 7.6 per cent year-on-year to US $87 billion for the first-half of 1998.

In sharp contrast to drops in foreign capital inflow into Asia, China registered US $20.5 billion in overseas direct investment in the first six months, which is almost the same compared to the corresponding period in 1997.