Huang Ju, the Chinese Vice Premier, today told global business leaders at the World Economic Forum that China would work towards allowing its currency, the renmimbi, to float freely on foreign exchange markets, but that structural improvements and banking reform were needed first.

"We’ll have a phased or step-by-step method to relax the restraints on the cross border trade of currency and gradually realise the convertibility of the renmimbi," he said in Davos.

The comments set back hopes that a breakthrough on currency issues could be made at next week's meeting of G8 finance ministers in London.

China tightly controls foreign exchange dealings and keeps the renmimbi - also known as the yuan - trading in a narrow range of around 8.28 yuan to the dollar.

Mr Huang also said that China could not grow economically "in seclusion and the world cannot develop without China’s development."

He added: "a more open and prosperous China will not only benefit its 1.3 billion people but also provide considerable investment opportunities and a vast market for other countries, so being a powerful engine for world economic growth."

"The Chinese government warmly welcomes and encourages foreign investment in high tech industries, modern agriculture, modern services, environment" Mr Huang said.

He pledged continued improvement in the investment environment and legal system, protection for intellectual property rights, and increased access to the country’s massive pool of potential consumers.

Robert Zoellick, the outgoing US trade representative, also speaking in Davos today, echoed the comments, saying that more must be done to include China – and India - in the global economy.

"These are two rising economic powers," Mr Zoellick said. "It’s critical that we integrate them into the system."

China’s average annual growth rate from 1979 to 2003 was 9.4 per cent and despite measures designed to cool the economy it has continued to race ahead since.

On Thursday, the Chinese government received praise from Bill Gates, the Microsoft founder, who told an informal meeting that China had created "a brand-new form of capitalism, and as a consumer it’s the best thing that ever happened."

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive