* China says exchange rate management is a sovereign issue
* Says yuan has not been a topic at previous G20 summits
* Says world economy faces uncertainty, especially euro debt
By Simon Rabinovitch and Aileen Wang
BEIJING, June 18 (Reuters) - China told the rest of the world on Friday not to meddle with the way it manages the yuan, calling the exchange rate a sovereign matter for it alone to decide and all but ruling it out of bounds at next week's G20 summit.
Beijing is under pressure from Washington in particular to let the yuan rise in value to help reduce the large U.S. trade deficit with China, and financial markets expect the issue to loom large at the Group of 20 meeting in Canada on June 26 and 27.
But senior officials brushed aside that idea.
"The RMB is China's currency, so I don't think it is an issue that should be discussed internationally," Cui Tiankai, a vice foreign minister who is China's G20 sherpa, the official in charge of preparing for the summit, told a news briefing.
For a Q+A on the yuan debate [ID:nTOE65A03M]
For an analysis on depegging, [ID:nSGE656020]
For an Insider piece on the yuan [ID:nRTV113389]
For a Breakingview commentary [ID:nLDE6520D4]
China has kept the yuan, also known as the renminbi (RMB), steady around 6.83 per dollar for almost two years to help its exporters ride out the global financial crisis. Many Western economists believe it is undervalued by as much as 40 percent.
Zhang Tao, head of the central bank's international department, said that as far as he knew the yuan had never been discussed at previous G20 summits.
"The Chinese government will decide on its foreign exchange rate policy according to both domestic and global economic situations," Zhang said.
The yuan rose to a one-month high against the dollar in offshore forwards on Friday as investors bet that China might eventually cave in to growing pressure to let the yuan rise in value. For the yuan market report, click on: [CNY/]
While the global economic recovery was unfolding more strongly than expected, it was facing multiple uncertainties, Zhang said.
Foremost among these was the euro zone's debt morass, Vice Finance Minister Zhu Guangyao added.
"The global economy is in the process of recovering, but still faces uncertainties, especially the European debt crisis," he said.
The European Union is China's biggest trading partner, and although China's overall exports have recovered to pre-crisis levels Beijing remains concerned that the world economy is not yet on a stable footing.
How swiftly countries should unwind the super-loose fiscal aand monetary policies they introduced to counter the global crisis will be high on the agenda at the G20 summit in Toronto.
Debt-averse Germany is pressing for a rapid reduction in budget deficits, while the United States and France fear deep cuts could derail the economic recovery.
Straddling the two camps, Zhu said countries with serious budget deficits should accelerate fiscal consolidation but in a manner that is "growth-friendly".
On the question of how global financial regulation should be reformed, Zhu said a key principle was that countries should chart their own paths based on their own economic conditions.
But, as general goals, he said the Group of 20 wealthy and emerging nations should work to strengthen banks' capital and liquidity requirements.