China would continue reform of the formation mechanism of its currency exchange rate to improve its flexibility, but will do so in a gradual way, Zhou Xiaochuan, governor of the People's Bank of China, China's central bank, said in Washington on Sunday.

Westerners prefer Western medication method that is quick but drastic, while Chinese people prefer traditional Chinese medication that is slower and giving time for different herbs to take effect. A steep rise of Chinese currency yuan would cause harms, Zhou told a group of bankers and reporters during a luncheon speech at the 2010 annual membership meeting of the Institute of International Finance (IIF).

To manage Chinese currency issue is a "complicated art," as you have to take into consideration domestic inflation, unemployment rate, gross domestic product (GDP) growth, balance of payments and other factors, he added.

IIF, which represents over 420 world leading financial institutions headquartered in more than 70 countries, host its annual membership meeting in Washington DC between Oct 8 and 10, when the International Monetary Fund and World Bank host their annual meetings at the same time.