Dec. 5 (Bloomberg) -- China's yuan advanced for a second day as the People's Bank of China called for more stable currencies and flexible exchange rate mechanisms.

Emerging-market economies should maintain ``stable currencies'' and adopt flexible exchange rates, said Governor Zhou Xiaochuan, in comments made available on the PBOC's Web site today. The yuan last month logged its biggest gain since the end of a link to the dollar in 2005, after officials in Europe and the U.S. pressed for faster gains to temper trade imbalances.

``Government agencies are not 100 percent sure this gradual appreciation policy will work out,'' said Guo Zhaoyang, a currency strategist at China Everbright Co. in Guangzhou. It's ``increasingly difficult to control the pace and rhythm of the yuan's appreciation.''

The currency rose 0.14 percent to 7.3880 per dollar as of the 5:30 p.m. close in Shanghai, from 7.3985 yesterday, according to the China Foreign Exchange Trade System.

Forwards contracts in the currency show traders are betting on an 8.9 percent appreciation to 6.7830 per dollar during the next 12 months.

``Emerging markets must maintain stable currencies, adopt flexible exchange rates, ensure confidence in the currency's convertibility and enhance the economy's adaptability to various kinds of shocks,'' Zhou said.

The yuan has been buoyed by speculation the central bank will allow faster appreciation and continue raising borrowing costs to curb inflation, which touched a decade-high in October, to prevent the economy from overheating.

China's gross domestic product may grow 11.6 percent in 2007, up from 11.1 percent last year, state-run Xinhua News Agency reported yesterday, citing a study from the Chinese Academy of Social Sciences in Beijing.

Treasury Sale

The finance ministry sold 30 billion yuan ($4.06 billion) in three-month treasury bills today at a lower yield than the market expected as orders closed for China Shipping Container Lines Co.'s share sale.

The zero-coupon bills due in March were sold at a yield of 3.383 percent, according to a bond trader with China Construction Bank Corp. in Beijing. The level compared with bids of 3.47 percent on similar-maturity securities in the secondary market, China Government Bond Fixings compiled by Bloomberg showed.

``The bills were sold with a yield lower than the market estimates,'' said Dong Dezhi, a bond analyst with Bank of China Trading Center in Shanghai. ``Funds in the interbank market are no longer tight.''

The seven-day repo fixing, a benchmark for China's interbank lending, retreated 15 basis points to 4.1 percent, from the more than one-month high of 4.25 percent reached yesterday.

China Shipping Container, Asia's second-largest cargo-box carrier, started to sell as many as 2.34 billion shares yesterday at a price range of 6 yuan to 6.62 yuan, according to a company statement dated Dec. 3.

To contact the reporters on this story: Aaron Pan in Hong Kong at Apan8@bloomberg.net; Belinda Cao in Beijing at lcao4@bloomberg.net.

Last Updated: December 5, 2007 04:58 EST