Toyota Motor Corp. and Honda Motor Co. suppliers sacrificed earnings in China by raising wages to end strikes, and Beijing's decision to allow greater exchange-rate flexibility may slow plans to export vehicles from the nation as the currency appreciates.
China's central bank will allow the yuan more flexibility, it said in a statement Saturday, signaling an end to the currency's two-year-old peg to the dollar. The currency climbed against the dollar at its fastest pace in 20 months and forward contracts jumped.
The looser currency stance comes "on the back of all these moves to endorse the wage increases," Jim O'Neill, Goldman Sachs Group Inc.'s chief global economist, said Sunday. "It's all part of moving to the consumer, more domestic-demand-driven economy."