BEIJING -- China's central bank chief, Zhou Xiaochuan, will visit Hong Kong this month to discuss a plan to allow banks in the territory to handle business in yuan, state media and a central bank official said.

Zhou would visit Hong Kong from September 18 to "hold discussions with the Hong Kong Monetary Authority on issues concerning the opening of personal renminbi (yuan) business in Hong Kong", the official *****China Securities Journal**** reported.

China has come under criticism from the United States and Japan that the yuan is too cheap at its current level -- pegged at around 8.28 to the dollar -- giving Chinese exporters an unfair advantage at the expense of U.S. jobs, an argument many economists have dismissed as fallacious.

China has agreed to free up its currency eventually but says it won't be bullied into action.

The yuan is currently convertible only for trade of goods and services, not for investment. But many analysts say Hong Kong yuan business could add upward pressure on the currency since it would give investors more free rein to bet on its eventual appreciation -- but it would have to be large-scale business to make a difference.

An official at the foreign affairs division of the People's Bank of China confirmed that Zhou would go to Hong Kong, but declined to give details.

"Governor Zhou will leave on September 18, but I don't know the specifics," the official told Reuters.

The visit follows that of a group of Chinese financial experts to Hong Kong last month to study the feasibility of allowing Hong Kong banks to take cash brought in by mainland travelers to give the city's ailing economy a boost.

Hong Kong banks, seeking new revenue sources to counter stagnant growth, have lobbied for an offshore yuan market, which some analysts say could be running by the end of this year or by early 2004.

The offshore services would include deposits, remittance, exchange, credit cards and a mechanism for the yuan currency to flow back to the Chinese mainland, state media have said.

Chinese officials hope such a market could curb money laundering and underground banking in Hong Kong, a former British colony which returned to China in 1997 but which still maintains a high degree of autonomy.

With more mainland tourists visiting Hong Kong, the amount of yuan circulating there has been piling up, with some estimates going as high as $10 billion. CAPTION

A Chinese teller counts 100 yuan notes at a foreign bank in Shanghai.