DAVOS, Switzerland--A senior Chinese official Thursday affirmed China's intention to decouple its currency from the U.S. dollar, while the head of the International Monetary Fund urged Beijing to improve communication with markets about changes to its foreign-exchange regime.
For years, China has hitched the yuan's value to U.S. dollar, but its central bank signaled in December that it would break the peg and instead manage the Chinese currency against a basket of 13 currencies.
However, in the wake of recent market turmoil-- partly triggered by a sharp depreciation of the yuan--investors and policy makers around the world have expressed uncertainty over China's exchange-rate policy.
"We're serious about the basket approach," said Fang Xinghai, a senior economic adviser to the Chinese leadership, at a panel organized by the World Economic Forum here Thursday. "It's a decided strategy."
With a crawling peg, the yuan has appreciated with the strengthening U.S. dollar, hurting Chinese manufacturers while the economy is weakening. Decoupling the yuan from the dollar could help Beijing's effort to rekindle growth.
"There's some catch-up to do" when it comes to adjusting the yuan's value against the dollar, said Mr. Fang, a director-general in the Office of the Central Leading Group on Economic and Financial Affairs, which functions like the White House's National Economic Council. "Once we're done with it, the yuan will be stable again," he said.
The remarks come as Chinese authorities seek to reassure global investors about Beijing's commitment to market reforms and to reshaping the world's second-largest economy so growth will be driven more by consumption, and less by debt-fueled investment.
Speaking at the same panel as Mr. Fang, IMF Managing Director Christine Lagarde called on the Chinese government to improve its communication with markets.
"Given the massive transition, there is a communication issue," she said. "Better communication certainly serves the transition."
In response, Mr. Fang said: "We should do a better job. And we're learning and doing it. I'm here to communicate."
Write to Lingling Wei at lingling.wei@wsj.com
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