"The yuan, despite moving closer to the level consistent with the overall assessment, remained broadly in line with fundamentals and desirable policies," said the IMF in its latest External Sector Report released on Friday.
According to the report, in 2016, the average real effective exchange rate (REER) depreciated by about 5.1 per cent compared to 2015, reflecting in part the strengthening of the US dollar, reports the People's Daily.
China's policies that were put in place to stabilise the growth has led to the yuan's appreciation and helped ease capital outflows and foreign exchange reserve loss, Luis Cabeddu, IMF research department's division chief said at a press briefing on Friday.
China's current account surplus declined to 1.7 per cent of GDP in 2016, falling substantially from its peak of about 10 per cent of GDP in 2007, the People's Daily quoted the IMF report as saying.
The IMF expected that China's current account surplus will continue to be narrowed if the country continues to implement reforms.
Despite the declines in foreign exchange reserves in 2015 and 2016, the IMF estimated that China's current level of forex reserves to be adequate.
The IMF warned that China may face potential risks of protectionist policies by its key trading partners in the future.