he concluding paragraph of Zhou's speech:

"In sum, the reform of RMB exchange rate regime to allow RMB exchange rate float with reference to a basket of currencies is in line with the needs of diversifying foreign economic and trade relations as well as the development of the international economic and financial system. Referring to a basket of currencies is not equal to pegging to such a basket. Pegging means mechanically adjusting the exchange rate of RMB against the US dollar according to the exchange rate movements of the currencies in the basket in an attempt to keep the nominal effective exchange rate unchanged. Quite differently, what we are having now is a managed floating exchange rate regime based on market demand and supply with reference to a basket of currencies. In comparison with an exchange rate regime of pegging to the US dollar solely, it can better reflect the competitiveness of RMB against major currencies, better absorb the impact generated by an unstable US dollar and moderate the fluctuations of RMB exchange rates at the multilateral level, safeguard the overall stability of China's foreign economic and trade environment and consequently promote the basic equilibrium of balance of payments as well as the sustained, coordinated and healthy growth of the Chinese economy."

Apart from the line about referring to the basket allowing China to "...better absorb the impact generated by an unstable US dollar" -- a clear indication that China thinks substantial weakening of the dollar over a short period of time is a real possibility -- this language could mean anything.

China may well want to move some of their maybe $500 billion into other currencies, or even a basket of currencies.

But if the move means a 10% depreciation of the USD, that's an effective cost of $50 billion -- for nothing, or almost nothing.

Prolly NOT buying more dollars, as the dollar strengthens, is the best China can do; buying Euros and yen and won, instead. But whatever they buy, in some sense they're getting paper for selling real products, like TVs & monitors.

Why not have more loans to local Chinese businesses who can increase production for the local market -- and hire more Chinese laborers who can then buy more of the local stuff. (They're already trying this ...)