China Companies, Banks `Far’ From Adapting to Yuan Flexibility – Bloomberg

From Bloomberg (link)

China’s government said companies and banks are far from adapting to a more flexible yuan, and that foreign-exchange reserves must be diversified to counter speculation the will rise.

China wants to move toward a more freely traded currency system and “everyone has to adjust,” People’s Bank of China Vice Governor Wu Xiaoling told reporters at a financial forum in Beijing today. The nation’s top planning body said China should use its foreign-exchange reserves, the world’s largest such stockpile, to buy oil or other “strategic materials” because the accumulation is boosting speculation the yuan is undervalued.

The U.S. is pressing China to loosen controls on the yuan, under pressure from lawmakers who say the currency is kept artificially weak to spur exports. China’s President Hu Jintao visits Washington next week for talks with counterpart George W. Bush that are likely to include the currency.

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