U.S. interest rates exceeded Chinese rates by about 3 percentage points after the Federal Reserve last month lifted rates in its 17th straight quarter percentage point hike, but that failed to cool expectations of a stronger yuan, Yi said.

"China will enter a cycle of raising interest rates as other central banks have already entered such a cycle to tighten liquidity," Yi was quoted as saying.

Analysts say the People's Bank of China, the central bank, has been treading cautionsly to limit capital inflows that could put more upward pressure on the yuan.

The government had kept interest rates artificially low to help push through reforms at state-owned companies, Yi said.

Chinese economists and officials have been locked in heated debate on how the government should steer the economy, some suggesting the yuan should be allowed to rise faster.

Last week, Chen Dongqi, vice head of the Academy of Macroeconomic Research under the National Development and Reform Commission, urged the central bank to raise interest rates and said it could learn from moves made by the U.S. Feb.

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