WASHINGTON, Dec. 19 (Xinhua) -- China does not manipulate its currency to gain unfair trade advantage, the U.S. Treasury Department said Tuesday.

    The Treasury "concluded that no major trading partner of the United States met the technical requirements for designation" of a country that is manipulating its currency to gain unfair trade advantages, said the department in its report to Congress on international economic and exchange rate policies.

    In the first half of 2006, China had taken further steps to strengthen and reform its financial sector to accommodate currency and interest rate fluctuations, said the report.

    During the six months, China took further steps to reform the currency market and RMB flexibility increased compared to the last six months of 2005, the report said.

    This increased flexibility, however, is considerably less than is needed, it added.

    The report, which the Treasury is required to deliver to Congress every six months, also said "China's economy needs a more balanced pattern of growth that is more consumption-based with a flexible exchange rate regime and a modernized financial sector."