The vice-foreign minister said the RMB rate's flexibility may widen, echoing the nation's central bank a month ago.

The announcement by Vice-Foreign Minister Zhang Zhijun comes after the People's Bank of China, which has the power to oversee the yuan and financial institutions, said it was in the process of reforming the exchange rate system.

China is also starting to receive more international pressure to let its currency appreciate. The nation adopted the policy of loosely pegging the RMB to the US dollar since the financial recession began.

"China will increase the flexibility of the RMB exchange rate at a controllable level in the future," Zhang said, "based on the market demand and with reference to a basket of currencies."

But he said, China will further work on the exchange rate policy on its own initiative and in a constructive and controllable manner.

Foreign exchange rates are expected to be the focus of the 12th China-European Union Summit scheduled next week in Nanjing, capital of Jiangsu province. The affluent Jiangsu province accounted for 18 percent of the total China-EU trade volume last year.

Three EU policymakers are due to hold talks in Nanjing a day before the summit with Premier Wen Jiabao and central bank officials, the Ministry of Finance as well as with the National Development and Reform Commission on Nov 29.

The trio are European Central Bank President Jean-Claude Trichet; Luxembourg Prime Minister Jean-Claude Juncker; and Joaquin Almunia, the EU's commissioner for economic and monetary affairs.

The summit, initiated in 1998, will be co-chaired by Wen, European Commission President Jos Manuel Barroso and Swedish Prime Minister Fredrik Reinfeldt, whose country currently holds the rotating EU presidency.

Newly elected EU president Herman Van Rompuy and foreign policy head Catherine Ashton are not coming to the summit as they prepare for their new roles.

At the summit, China hopes to forge a common stance with Europe against protectionism, said Sun Yongfu, director of the Department of European Affairs with the Ministry of Commerce.

"We welcome more products from foreign countries to China and also from the EU," Sun said.

China and the EU will also discuss ways to tackle climate change at the summit, Zhang said.

"The upcoming China-EU summit is very important leading up to the Copenhagen conference," he said.

This will be the second China-EU Summit and the third meeting between leaders from both sides this year.

The last China-EU Summit was held in Prague in May, postponed from last December by China after French President Nicolas Sarkozy met with the Dalai Lama.

"The EU is practical in economic ties with China but ideal-oriented in human rights and values," said Zhao Junjie, an expert in European studies with the Chinese Academy of Social Sciences.