Their July 21 revaluation of the yuan by 2.1 percent managed to tread a careful path between the conflicting demands of Washington and China's exporters -- although some analysts felt more could have been done -- and since then they have moved steadily to create a more flexible trading system.

"I think they've been doing very well. They've been moving aggressively in terms of building up the necessary financial infrastructure," Frank Gong, chief economist with JP Morgan Chase in Hong Kong, said of the People's Bank of China.

The yuan has risen by less than 0.5 percent against the dollar since the revaluation, and was quoted at 8.0705 per dollar yesterday.

Since the revaluation, the central bank has steadily introduced such forex derivatives as forwards and swaps, giving institutions and firms tools to hedge against currency fluctuations. It has also launched a liquidity-promoting trading method known as market-making, set to take effect in early 2006.

Gong played down concerns that the yuan has not risen quickly enough, noting that it had appreciated by more than 6 percent against the trade-weighted basket over the year.

"That the yuan did not weaken, but actually strengthened, in a strong dollar environment is a very good sign that once the weaker dollar environment resumes, you will see more significant appreciation of the yuan against the dollar," he said.

Next year should see even more aggressive development of market infrastructure, meaning more products, more flexibility, more competition, and less interference by the central bank, said Minggao Shen, China economist with Citigroup in Beijing.

Shen praised the central bank's efforts at communicating to the US government why it needed a gradualist approach.

Despite calls from the US Congress for punitive measures against China because of the yuan's modest appreciation against the dollar, it has so far avoided being termed a "currency manipulator" by the Treasury Department.

The central bank has repeatedly said any further appreciation in the yuan would be gradual and would take place within the exchange rate regime established in July.

Many economists take the central bank on its word on that. A number of investment bank economists have issued research notes this month projecting that the yuan will appreciate at most by 4 percent over 2006. Few expect another sudden revaluation.