China could help the world economy and its own by allowing its currency to trade more freely, a senior official from Canada’s Department of Finance said today.

A more flexible currency would help shift global demand and increase China’s purchasing power, the official said today on condition of anonymity during a conference call in Ottawa. The global recovery depends on demand “rotating” to faster-growing economies from developed economies, the official said.

Canada and South Korea will co-chair a meeting of Group of 20 central bankers and finance ministers this weekend in the Asian city of Busan. Talks will focus on sustainable economic growth and plans to pare back fiscal stimulus as the recovery builds, as well as the sovereign debt crisis in Europe, where governments have created a “bold plan” that may calm financial markets, the official said.

The Chinese renminbi, or yuan, has been pegged at a rate of 6.83 yuan to the dollar for almost two years.

Chinese President Hu Jintao pledged steady and gradual reforms in the exchange rate during last week’s U.S.-China Strategic Economic Dialogue. U.S. Treasury Secretary Timothy F. Geithner who attended the talks in Beijing, said on May 25 that he’s “as confident as I’ve ever been” that China has a growing incentive to let the yuan gain against the dollar.

--Editors: Paul Badertscher, Andrew Barden

#<207406.6041682.2.1.46.17993.25># -0- May/31/2010 18:07 GMT

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net; Greg Quinn in Ottawa at gquinn1@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.ne NI BCN NI BON NI CAECO NI CANADA NI CECO NI CEN NI ECO NI FRX NI G7ECOS NI G8 NI GOV NI GOVMISC NI MARKETS NI MMK NI POL NI CHINA NI ASIA

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