The United States called on China to speed up progress in making its currency more flexible, but refrained from branding Beijing a currency manipulator, a move that could trigger sanctions.
In a long-delayed report to Congress, the US Treasury said it had concluded that China was allowing the yuan, or renminbi, to appreciate against the dollar and had shown willingness to continue promoting exchange-rate flexibility.
The Treasury Department cited "the ongoing appreciation of the renminbi against the dollar since June 2010" as well as "China's public statements asserting that it will continue to promote RMB exchange rate flexibility."
The Department also noted "China's recent policy commitments through the G20 and the US-China Strategic and Economic Dialogue to address external imbalances," the Treasury said in a statement.
"However, Treasury believes that progress thus far is insufficient and that more rapid progress is needed."
Since China's pledge in June 2010 that it would make its currency more flexible, the yuan had appreciated 5.1 per cent against the dollar since then through the end of April, or about a 6.0% annual pace.
Adjusted for China's "significantly" higher inflation compared with the US, the currency has appreciated at a much stronger annual rate of roughly 9.0%, the report said.
"By trying to limit the pace of appreciation, China is not allowing the exchange rate to serve as a tool to counter inflation in its own economy," the Treasury said.