China will find new ways to make the exchange rate of its currency more flexible even as it will seek at the same time to ensure its basic stability, the central bank said Monday.

The central bank outlined its exchange rate policies for 2007 as its governor, Zhou Xiaochuan, met the press in Beijing.

"The managed floating exchange rate regime will be further improved and the flexibility of the exchange rate will be enhanced," the central bank said in a statement prior to Zhou's presser.

"(We will) keep the exchange rate basically stable at an adaptive and equilibrium level," it said.

In July 2005, China delinked the yuan from the dollar and since then it has risen by nearly seven percent against the US unit, including a 2.1 percent revaluation at the time of the decision.

The yuan's daily trading band against the dollar is currently 0.3 percent on either side of a base rate set by the authorities at the beginning of each trading day but in practice, it has not come anywhere near that amount.

Zhou gave no indication that the trading band of the yuan might be gradually expanded.

Zhou said later in the press conference that China needed time to reduce its trade surplus, a major bone of contention with its trade partners, especially the United States which claims a weak yuan is a major contributor to the problem.

"There is an imbalance and it will take some time before adjustment measures can gradually produce results," he said, while noting that China's export costs are rising due to higher labor and social security costs.

At the same time, China has taken a number of measures to boost imports, such as buying a large amount of raw materials from overseas, said Zhou.

"Both exports and import are growing. We have to see which one runs faster."

China's trade surplus last year soared 74 percent to hit a record 177.5 billion dollars -- and totalled more than 200 billion dollars with the United States alone, according to US figures.

Exchange rate policies could go some way toward making the surplus smaller, Zhou suggested in the briefing.

"The exchange rate policy can have a certain function as price leverage and can help adjust the balance between imports and exports," he said.

Commerce Minister Bo Xilai said earlier that China was studying various policies to shrink the surplus.

"We noticed that last year's trade surplus was relatively large so we've made the reduction of the surplus a macro-economic objective," Bo said, according to the China Securities Journal.

In the statement outlining tasks for the year ahead, the central bank also said it would push ahead with more market-based interest rates.

"The market-based interest rate reform will be actively and prudently pushed forward to establish a mechanism whereby interest rates are determined by market supply and demand, and are responsive to monetary policy actions of the central bank," it said.

The central bank has tightened policy progressively in the past few years, seeking to cool an economy which grew 10.7 percent in 2006 despite the government's efforts to slow it down to a more sustainable pace.