China should allow the yuan to move more freely to help reduce global imbalances, an EU commissioner said yesterday.

Although the yuan is no longer pegged to the US dollar and has been more flexible since July 2005, it's not enough - especially its rate against the euro, said Joaquin Almunia, European Union economic and monetary affairs commissioner.

In a speech to Tsinghua University students, he said China has relied too much on exports and investment instead of domestic demand, a situation that would be eased with a more flexible exchange rate policy.

Such a policy would help reduce global imbalances, he said.

Almunia is the latest Western figure to call for bigger steps in yuan revaluation. China has been under constant pressure to revalue its yuan.

Almunia will meet top Chinese officials in charge of economic affairs during his three-day visit, such as Zhou Xiaochuan, governor of the central bank, and Lou Jiwei, who is expected to head the new State investment company.

He said he expected investment by the new foreign exchange body to be "transparent" in overseas markets, including Europe.