China currency must rise to fix imbalances: Soros

Billionaire financier George Soros speaks at a Reuters Newsmaker event in New York September 15, 2010.

LONDON (Reuters) - Billionaire investor George Soros considers the global currency system "lop-sided" and "controlled" by China, and urged the Asian giant to allow its currency to appreciate.

Soros' comments to BBC radio on Friday, broadcast on Saturday, come as global finance chiefs at a meeting in Washington seek to prevent tensions over currency valuations from derailing a fragile economic recovery.

"One of the basic imbalances that was at the root of the financial crisis and which needs to be corrected is the chronic (trade) surplus in China and big deficit in the United States," Soros said, referring to the 2008 financial crash.

China has kept its yuan currency undervalued in a managed float to keep its exports competitive.

"Certainly a better alignment of those two currencies would help over time to correct that imbalance," he added.

At annual meetings of the World Bank and the International Monetary Fund (IMF) on Friday, finance ministers and central bank governors repeated a call for export powerhouses, such as China, to spend more at home so indebted countries, like the U.S., can rebuild their finances without risking a still-fragile global recovery.

Officials worry that a weak U.S. dollar and relatively strong currencies elsewhere could push nations into a round of currency depreciations to help their exports.

Soros said China's currency should be allowed to appreciate, but a sudden jump of 20 percent or more would lead to reduced exports and unemployment in China, reducing consumption there.

"So you can't adjust the exchange rate too rapidly, but 10 percent a year should definitely be doable. That would mean that you take two years to get 20 percent."

China, which has rebuffed calls from the West to let its currency rise faster, allowed the yuan to firm on Friday to its highest level against the dollar since a revaluation in July 2005.

The IMF and World Bank meetings continue over the weekend.

(Writing by Mohammed Abbas: Editing by Toby Chopra)