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China's central bank governor Zhou Xiaochuan has come out fighting in response to mounting pressure to allow the country's currency to rise.

China will move to a market determined exchange rate, but gradually. He said "there will be no shock therapy".

Mr Zhou was speaking in a ���˿��� World News debate at the annual meetings of the International Monetary Fund (IMF) and the World Bank in Washington.

Tensions have been rising for months over China's currency policy.

In the last few days, the phrase "currency war" has been used. The IMF managing director Dominique Strauss-Kahn has used it, although in the ���˿��� debate he said "war" was probably too strong a word.

Global imbalances

China holds down the value of its currency, the yuan or renminbi, by intervening in the markets, buying dollars and other currencies. To critics, the result is an artificially low yuan, which gives an unfair advantage to Chinese industry.

Mr Strauss-Kahn has some sympathy for that complaint. In the ���˿��� debate, he said the Chinese currency is undervalued.

This is part of a long standing IMF view that the global economy is unbalanced.

China, and some other countries, save and export too much. The reverse is true of the US and others. Changing China's exchange would contribute to rebalancing the world economy by making China's exports less competitive.

But nobody at the debate thought a currency reform would be a "silver bullet" that would fix all the problems. The US and others need to take their own steps to save more.

Mr Strauss-Kahn said that China should move away from its export-led approach to economic growth.

That means encouraging an economy that is more dependent on spending by Chinese consumers. It would, he said, create millions of jobs in China and, as a consequence, millions of jobs outside the country.

Savings rate

What bothers Chinese officials is the possibility that moving quickly on the exchange rate might hit export businesses, and lead to many job losses. That is the kind of shock therapy that Mr Zhou wants to avoid.

Christina Romer, a former economic adviser to President Obama, said that the Chinese currency is one issue. But there are more. She had one specific example.

China should put in place a healthcare system, so that people save less - because they wouldn't have to worry about paying for treatment. They would then buy more products from the rest of the world.

This ���˿��� debate aired the issues. China's exchange rate policy is an important one and the rest of the world wants change.

Chinese officials, in this case no less a figure than the central bank governor, say it is coming. But it still looks like it will be at their own pace - a time scale that is far too slow for their critics.

At the very least, a war of words over currency will be with us for a while yet, probably several years.