WASHINGTON -- The US Treasury Department said on Friday China has not met standards of a currency manipulator, but it would closely monitor the pace of the Chinese yuan (RMB) appreciation.

In its Semi-Annual Report to Congress on International Economic and Exchange Rate Policies, the Treasury highlighted the need for greater exchange rate flexibility, including China and some other major economies.

The report, which was released on Friday, concluded that China did not meet the standards of a currency manipulator.

Such a conclusion is based on the fact of the RMB's appreciation against the dollar since June 2010 and the decline in China's current account surplus.

China has committed itself in the G20 Summit and the China-US Strategic and Economic Dialogue to moving rapidly to a more market-determined exchange rate system, the report said.

"Since China initiated currency reform in July 2005, the RMB has appreciated 40 percent bilaterally against the dollar after adjusting for inflation," according to the report.

The US Omnibus Trade and Competitiveness Act of 1988 requires the Treasury to provide reports on whether countries manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.

The Treasury said China's recent move to widen the daily RMB trading band "has the potential to increase exchange rate flexibility."

It also mentioned the steps China has taken to liberalize its capital account, including by increasing the ability of portfolio investors to invest in Chinese assets.

However, the Treasury said it would continue to closely monitor the pace of RMB appreciation.

The report said the US economy would expand at a moderate pace through the end of 2012. Private forecasters currently expect real GDP to grow by 2.2 percent in the second quarter of this year, and 2.3 percent over the four quarters of 2012.

The government is firmly committed to putting the federal budget on a sustainable path, said the Treasury.