China not quite ready for IMF currency basket, U.S. says

SAN FRANCISCO (Reuters) - The United States feels China's yuan does not yet meet the standards for inclusion in the International Monetary Fund's basket of global currencies, Treasury Secretary Jack Lew said on Tuesday.

The yuan's inclusion in the basket, which defines the value of the IMF's reserve assets, would add to China's global status while encouraging more central banks to hold the currency.

Currently the basket includes the dollar, the yen, the euro and the pound, and the IMF is reviewing the composition of the basket this year.

Officials at the international lender look for a currency to be used heavily in international trade as well as freely convertible. Lew said that China had more work to do.

"While further liberalization and reform are needed for the (yuan) to meet this standard, we encourage the process of completing these necessary reforms," Lew said in a speech at the Asia Society Northern California in San Francisco.

The yuan is already the world's fifth most-used currency in trade, and Beijing has made almost weekly strides this year in introducing the infrastructure needed to float it freely on global capital markets.

Lew, who was returning from a trip to Beijing where he met with Chinese officials, repeated the U.S. view that China appears to have stopped intervening to weaken its currency.

But he said the true test of whether China had shifted policy would come when market pressure increased for the yuan to strengthen.

"We expect China to continue to refrain from intervention across different market conditions," he said.

In a wide-ranging speech that touched on trade, regulations and international finance, Lew also warned China against blocking foreign technologies, saying this could damage U.S.-China relations.

Lew said Washington stood ready to welcome a China-led development bank as long as it complemented existing institutions and adopted high governance standards.

China in recent weeks has convinced several U.S. allies in Europe to become founding members of the Asian Infrastructure Investment Bank, a sign of Beijing's rising stature.

Washington would like the AIIB to partner with existing institutions such as the World Bank and Asian Development Bank, which could push the new bank to adopt existing standards.

"I was encouraged by my conversations in Beijing in which China's leaders made clear that they aspire to meet high standards and welcome partnership," Lew said.

(Reporting by Rory Carroll in San Francisco; Additional reporting by Jason Lange in Washington; Editing by Andrea Ricci Ted Botha and Steve Orlofsky)