* China set to grow by more than 9 pct this year

* No basis for sharp yuan rise; rate nearer to equilibrium

* China to keep mix of FX reserve assets

* Beijing in no rush to make yuan a global currency;

By Aileen Wang and Alan Wheatley

BEIJING, July 30 (Reuters) - China has overtaken Japan to
become the world's second-largest economy after the United
States, the country's chief currency regulator said in remarks
published on Friday.

The economy expanded 11.1 percent in the first half of 2010,
compared with a year earlier, and is likely to log growth of
more than 9 percent for the whole year, according to Yi Gang,
head of the State Administration of Foreign Exchange.

"China, in fact, is now already the world's second-largest
economy," he said in an interview posted on his agency's
website, www.safe.gov.cn.

Yi said China's growth rate, which has averaged more than
9.5 percent a year over the past 30 years, was bound to slow
over time. If China could chalk up growth this decade of 7-8
percent annually, that would still be a strong performance.

The issue was whether fast growth can be sustained, he said.

If China expands by 5-6 percent a year in the 2020s, it will
have maintained rapid growth for 50 years, which Yi said would
be unprecedented in human history.

He said expectations of a stronger yuan <CNY=CFXS>, also
known as the renminbi, had diminished. There was no basis for a
sharp rise in the exchange rate, partly because the price level
in China had risen steadily over the past decade.

"This suggests that the value of the renminbi has moved much
closer to equilibrium compared with 10 years ago," he said in
the interview with China Reform magazine.

MODEST AMBITIONS FOR YUAN

Yi's remarks carried an echo of a report by the
International Monetary Fund on Thursday, which said the Chinese
authorities viewed the yuan right now as closer than ever to
equilibrium. [ID:nBJL002052]

"At present, there is no basis for big fluctuations in the
yuan. We have the conditions to keep a flexible exchange rate
mechanism and we can keep the yuan basically stable at a
reasonable and balanced level," he said.

Yi's comments are unlikely to go down well in Washington,
where lawmakers have scheduled a hearing for Sept. 16 to
consider whether U.S. government action is needed to address
China's exchange rate policy. [ID:nWBT014065]

China scrapped the yuan's 23-month-old peg to the dollar on
June 19 and resumed a managed float. The yuan has since risen
only 0.8 percent against the dollar, and economists calculate
that it has fallen in value against a basket of currencies.

Beijing had no timetable to make the yuan fully convertible,
Yi said: "China is very big and its development is unbalanced,
which makes this problem much more complicated. It's difficult
to reach a consensus on it."

In the same vein, he said China was in no rush to turn the
yuan into a global currency.

"We must be modest and we still have to keep a low profile.
If other people choose the yuan as a reserve currency, we won't
stop that as it is the demand of the market. However, we will
not push hard to promote it," he added.

China has been encouraging the use of the yuan beyond its
borders, allowing more trade to be settled in renminbi and
taking a series of measures to establish Hong Kong as an
offshore centre where the currency can circulate freely.

But Yi said: "Don't think that since people are talking
about it, the yuan is close to becoming a reserve currency.
Actually, it's still far from that."

China would stick to the principle of holding its $2.45
trillion of international reserves in a mix of currencies and
assets.

The stockpile -- the world's largest - was so big that it
was impossible to adjust its currency composition in a short
space of time, he added.

"We won't be particularly bearish on the dollar at a given
time or particularly bearish on the euro at another time," he
said.
(Additional reporting by Zhou Xin; Editing by Ken Wills)