Chinese leaders joined G7 ministers at the gathering in Germany

Beijing needed to speed-up efforts to improve the exchange rate flexibility of its yuan currency, G7 ministers said at the end of their meeting in Germany.

The G7 nations sounded an upbeat note over prospects for the global economy, forecasting growth of 5% this year.

They also declared confidence in Japan's recent economic recovery.

In a statement at the close of discussions in the German city of Essen, the G7 added that they believed the US economy remained solid, while key European economies were improving their performance.

China pressure

The G7 meeting in Essen, which began on Friday evening, brought together the finance leaders of Canada, Britain, France, Germany, Italy, Japan and the US.

We want the markets to be aware of the risks of one-way bets, in particular on the foreign exchange market Jean-Claude Trichet, European Central Bank President

The Chinese yuan and the Japanese yen were among the main talking points at gathering.

China, which recently leapfrogged Britain to become the world's fourth largest economy and was at talks despite not being a G7 member, said it wanted the yuan to be more flexible.

Beijing has been accused of undervaluing its currency, making Chinese exports artificially competitive on the global market.

"In emerging economies with large and growing current account surpluses, especially China, it is desirable that their effective exchange rates move so that necessary adjustments will occur," the G7 said in a communique at the close of the meeting on Saturday.

Responding, China's finance minister, Jin Renqing, said his country would "continue to strengthen macroeconomic adjustments".

Japan has also been accused of undervaluing its currency, but speaking before the gathering Japanese Finance Minister Koji Omi said the yen's current low value simply reflected the country's ongoing economic recovery.

The G7 warned against the potential dangers "carry trades" posed, where investors borrow vast amounts in low-yield currencies - such as the yen - to reinvest for a profit elsewhere.

"We want the markets to be aware of the risks of one-way bets, in particular on the foreign exchange market," said European Central Bank President Jean-Claude Trichet.