BEIJING - Conditions are not ripe at present to freely float the yuan, Chinese economists said on Wednesday after US Treasury Secretary Timothy Geithner again pressed China on reform of its financial system.

Vice-Premier Wang Qishan and State Councilor Dai Bingguo will co-chair the third round of the Strategic and Economic Dialogue (S&ED) with US Secretary of State Hillary Clinton and Geithner in Washington on May 9-10.

Related readings:  China to be US largest trading partner in a decade: Geithner  Geithner praises Chinese economy ahead of talks  Has the yuan appreciated or depreciated?  Yuan rises past key level versus dollar

China's monetary policy and the further opening of its financial markets to US institutions are expected to be high on the agenda.

"It would be inappropriate for China to let its currency float freely at present, given the ongoing second round of quantitative easing initiated by the US and the resulting excessive liquidity," said Chen Daofu, policy research chief at the Financial Research Institute of the State Council's Development Research Center.

The US will continue to press for a faster appreciation of the yuan during the annual talks, analysts said.

Geithner said on Tuesday that China must improve its financial system, open up its capital market and level the playing field for all players, including foreign firms, if it wants to achieve balanced growth.

"Through the S&ED, we are encouraging China to allow markets to determine interest rates and the allocation of credit, to develop a more diversified financial system, with deeper bond and equity markets, and to make it easier for foreigners to make portfolio investment in China and for Chinese citizens to make portfolio investment abroad," he said.

Some Chinese economists have also urged the government to let the yuan float freely as a way to reduce the country's immense foreign-exchange reserves and to ease inflationary pressure.

Yu Yongding, a former adviser to the People's Bank of China, the central bank, said that China should allow its currency to strengthen against the dollar to fight inflation. It should also stop piling up dollar assets to avoid losses as the US currency weakens, he said.

Hu Xiaolian, deputy central bank chief, said in March that China will gradually open its capital account by achieving a major breakthrough in full convertibility of the yuan over the next five years.

Chen said that China should accelerate the full convertibility of the yuan in trade and direct investment. But policymakers, he added, should remain cautious about trading in financial markets, especially those that involve high-leveraged derivative products, to avoid drastic fluctuations and irregular cross-border capital flows.

In previous meetings, Washington focused on the Chinese currency's exchange rate, intellectual property rights and access to the Chinese market.

China, meanwhile, asked the US to grant it market economy status and more investment opportunities for Chinese companies, and to ease control on technology exports to China.

Geithner said that China's current financial system, which favors State-owned enterprises, makes it tough for foreign companies to compete in China and fuels tension among trade partners. The US wants to see a "more fair and efficient allocation of credit and capital" in China, he said.

But Chinese officials have defended the country's stance, saying that it has been steadily reforming its economic systems to provide a level playing field for all market players.

Li Xing and Tan Yingzi in Washington contributed to this story.