UPDATE 1-Zhou says China reserve growth undesirable-magazine

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NEW YORK, April 18 (Reuters) - The pace of growth of China's foreign exchange reserves is "not desirable" and controlling its rise should help improve the country's balance of payments, the People's Bank of China governor was quoted on Friday as saying.

"I should say that (the current rate of foreign exchange accumulation) is not desirable because the government already admits that they want to have better balance of payments," Zhou Xiaochuan, the head of China's central bank, told Emerging Markets magazine in an interview.

At the end of March, China's foreign exchange reserves rose to $1.68 trillion, the magazine said. On Thursday, the Chinese yuan rose to a new post revaluation high of 6.9834 CNY=CFXS yuan to the dollar.

Zhou also said that the recent weakness in the dollar has yet to have a significant impact on China's balance of payments. "For the past few years, the percentage of U.S. dollar depreciation was not very significant to have a major impact on Chinese balance of payments," Zhou said.

Until now, he noted that Chinese exports had remained healthy despite a U.S. economic slowdown.

"Up to now, the reality of a negative impact on Chinese exports has been less than predicted. So if we look at exports to the U.S. from China, we could see still them growing, though at a lower rate, but we have yet to find them declining," he said.

The United States runs a huge trade deficit with China and the trade gap has become a focal point for protectionist politicians in the run-up to the U.S. elections later this year.

Zhou also believes the impact of the U.S. subprime mortgage crisis on China has so far been minimal, but he suggested that further fallout from the turmoil could prompt closer scrutiny of the rapid rate of financial liberalization in many emerging market economies.

"Certainly along with the events we may have to start thinking about this," he said. "But it is better to talk about that after we see how the turmoil is terminated." (Reporting by Gertrude Chavez-Dreyfuss; Editing by Tom Hals)