"In China and other surplus emerging market economies, allowing exchange rates to appreciate to reflect market forces is the most powerful near-term tool to accelerate the shift to domestic consumption," said Lael Brainard, undersecretary of the Treasury for International Affairs.
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President Barack Obama will attend the Group of 20 gathering of leaders on November 3 and 4 in Cannes, France, and his administration has said that he will continue to push China's President Hu Jintao to allow the yuan to rise further.
U.S. senators earlier this month passed legislation to punish China for what they claim are policies that keep the yuan artificially cheap against the dollar to boost Chinese exports into the United States, at the cost of U.S. jobs.
Obama has voiced reservations about the yuan currency bill, which has little chance of becoming law because it is opposed by Republicans who control the House of Representatives, but he does believe the yuan is undervalued and needs to rise.
Brainard noted that emerging economies with trade surpluses -- of which the largest by far is China -- have already committed to the G20 to allow their currencies to achieve greater flexibility to reflect economic fundamentals.
Furthermore, with Europe and U.S. growth likely to be subdued for a while, it made sense for China to focus internally and abandon an "outdated" export-driven growth model.
"They are looking at the same numbers we are," she told a briefing at the White House. "So it's very much in China's own interest ... to shift to domestic consumption-led growth rather than relying on an outdated growth model based on net exports to advanced economies where demand is likely to be weak for some time," she said.
(Reporting by Alister Bull and Deborah Charles; editing by Philip Barbara)