Two prominent Beijing economists are urging the government to let the yuan float freely as a way to limit the country's immense foreign-exchange reserves, fight inflation and spur the remaking of the Chinese growth model.

"We should quickly stop buying foreign exchange in the market," said Huang Yiping, an economist at Peking University's China Macroeconomic Research Center, told The Wall Street Journal.

"We can have a conditional free float; let the exchange rate be set by the market," Mr. Huang said, adding that under such conditions he figures the yuan would appreciate about 30% in a year, to about five yuan to the dollar.

Mr. Huang is working on his proposal with Yu Yongding, a former adviser to the central bank and a professor at the Chinese Academy of Social Sciences. Mr. Yu in March published an article called "Learning to Float," in which he argued that the Chinese government "should be able to help enterprises and workers that suffer undue pain from the renminbi's appreciation."

The two men say they confer on how to manage a freely floating currency. Mr. Huang says he has made pitches for his ideas at the People's Bank of China, Ministry of Finance and National Development and Reform Commission. So far the proposal hasn't had much effect. The Chinese leadership remains committed to tightly managing the yuan's appreciation at an average of roughly 0.5% a month.

But the central bank and other agencies use the prestige of academics to lobby the two decision-making bodies—the government's State Council and the Communist Party's Politburo—to change direction.

Mr. Huang said a freely floating currency should be accompanied by two major conditions: tight controls on portfolio investment as a way to ensure that investors don't upend the economy by massively investing or pulling out investments. Investors should be able to withdraw their money, he said, "but you can't do it overnight."

Second, he would limit the amount the yuan could move daily to 5% to 10%. "It's only applicable in drastic situations when confidence collapses," he said.

Why make the change? He said China's $3 trillion in foreign reserves was likely to lose value with the appreciation of the yuan, so it was important to end the buildup. The huge hoard of foreign exchange means "we're lending money to lots of countries and getting very low returns," he said. "I don't know if we can preserve the value [of the reserves], and there is no alternative to [investing in] the dollar."

Letting the currency float would also end the central bank's need to "sterilize" the inflow of dollars by issuing bonds in yuan. That operation adds to the money supply and boosts inflation, he said.

He said the current strategy of letting the currency appreciate gradually wasn't working well because traders keep betting on additional appreciation. A big one-time appreciation wouldn't make much difference either, he said, because the market would expect further appreciation later. If the yuan freely floated, he said, it would find its natural level and then fluctuate up or down.

A stronger yuan could hurt exporters. But for China to grow strongly in the future, he said, it's important for exporters either to learn to produce higher-value products or to relocate their production inland, where wages are lower, from the coast. "When the currency moves up, all industries will have to move up," he said. "It's how we can get sustainable growth."

He said that central bank officials are sympathetic to his ideas and Mr. Yu's, but that they don't make the final call. "The key issue isn't whether the PBOC agrees," he said. The issue is whether top leaders agree."