The International Monetary Fund's chief economist on Wednesday said it was unclear if any loosening of the Chinese yuan's peg to the dollar would ease credit supply and prevent overheating of the Chinese economy.
China's broad money supply surged nearly 20 percent in 2003, fuelling explosive industrial expansion in the country, while outstanding loans hit 17 trillion yuan at the end of last year, up more than 21 percent from a year earlier.
China's central bank plans to raise the level of reserve requirements for some poorly capitalised banks amid concerns about over-investment and inflation.
"My sense is that the biggest problems the authorities have is not so much centralised control over the credit allocation, but the fact that reining in some of the credit allocation by the banks and bank branches is really the biggest problem," Raghuram Rajan told reporters on a conference call.
"Whether more exchange rate intervention will help solve that is an open question."
The IMF has urged China to unpeg the yuan from the US dollar to help reduce global imbalances reflected in the ballooning US current account deficit.
Rajan said there was "excessive" blame put on China for the US current account deficit.
He said some goods from other Asian economies were flowing to the US via China, which has become a regional manufacturing and processing hub.
"So what was a direct export from Asia to the United States now goes via China and shows up as the US bilateral deficit with respect to China. So I think there is excessive blame put on China," Rajan said.
Rajan said that, if China showed some flexibility in the yuan, it would encourage other Asian countries to follow suit "which will have some overall impact on the US current account deficit."