China has so far resisted pressure to adjust its exchange rate

America has long argued that China artificially pegs the yuan below its true market value, so as to give Chinese exports an unfair advantage.

Mr Greenspan said he was sure that China would remedy the situation "reasonably soon".

Yet his Chinese opposite number Zhou Xiaochuan said it was some time away.

'More flexible'

Speaking to a conference of central bankers in Beijing via satellite video link from Washington, Mr Greenspan argued that China would also benefit from liberalising the yuan's exchange rate.

As for the building up of international pressure, some of it is not out of economic considerations, some of it is politically based Chinese central bank boss Zhou Xiaochuan

"I've said on numerous occasions I think it is to the advantage of China to allow a little more flexibility in the exchange rate," he said.

Mr Greenspan added that China's current system hurt the Chinese economy because it promoted inefficiencies.

"In enhancing global growth, it is important that the structure of the Chinese economy be as flexible and integrated into the world economy as much as possible," he said.

Mr Greenspan also drew attention to the fact that to maintain the yuan's fixed level against the dollar, Beijing has to buy large quantities of the US currency, something he said "cannot go on indefinitely".

'Domestic considerations'

Yet Mr Zhou insisted in response that China had to take into account its domestic economic needs, as well as the requirements of the global economy.

"As for the building up of international pressure, some of it is not out of economic considerations, some of it is politically based.

"This is not a favourable environment for China to put forward its reform and for its decision-making process."