Continuing Chinese worries are excessively rapid investment growth

The People's Bank of China also said it will let foreign investors take larger stakes in financial institutions.

Meanwhile, Xinhua news agency has said policies to cut over-rapid investment and credit growth will continue.

There are large imbalances in China's economic development at present, and continued fears of overheating.

The central bank has raised interest rates twice since April, while the government has introduced tougher land-use and environmental standards in an attempt to deter wasteful investment.

Xinhua quoted Ma Kai, head of the National Development and Reform Commission, as saying China should continue making use of economic, legal and administrative measures to keep control of the economy.

'Strengthening controls'

Meanwhile, the central bank said that although foreign investors could take larger stakes in China's financial services industry, the state would retain overall control.

"China will strengthen the control of its main financial institutions in order to safeguard national financial security," the central bank said.

Three consecutive years of growth exceeding 10% a year have seen China pass Britain to become the world's fourth largest economy. It is on track to record its fourth straight year of double-digit growth.

Foreign financial institutions have bought into China's big banks prior to their recent stock market listing.

However, the government now wants to see foreign investment which boosts the development of regions that are lagging behind the fast-growing coastal provinces.

Yuan gains

China's economy, which grew 10.7% in the first nine months of 2006 compared with a year earlier, still faced serious imbalances, the central bank added.

It said continuing worries were excessively rapid investment growth, sluggish consumption demand and a big balance-of-payments surplus.

Although consumer prices rose only 1.5% in the year to September, the bank said these imbalances were adding to liquidity in the banking system that could fuel inflation.

After the foreign exchange announcement the yuan on Monday achieved its second biggest daily gain against the dollar since it was revalued in July 2005.

The yuan hit a post-revaluation high for the third straight trading day.

It closed at 7.8738 to the dollar, gaining 0.20% on Friday's close of 7.8896, and its second biggest rise since Beijing revalued the yuan by 2.1% and depegged it from the US currency in summer 2005.