China is calling for a global currency to replace the dominant dollar, showing a growing assertiveness on revamping the world economy ahead of next week's London summit on the financial crisis. The surprise proposal by Beijing's central bank governor reflects unease about its vast holdings of U. Both the United States and the European Union brushed off the idea.
The world economic crisis shows the "inherent vulnerabilities and systemic risks in the existing international monetary system," Gov. Zhou Xiaochuan said in an essay released Monday by the bank.
He recommended creating a currency made up of a basket of global currencies and controlled by the International Monetary Fund and said it would help "to achieve the objective of safeguarding global economic and financial stability. Zhou did not mention the dollar by name. But in an chinese bitcoin exchange to shut downone news page video step, the essay was published in both Chinese and English, making clear it was meant for a foreign audience.
China has long been uneasy about relying on the dollar for the bulk of its trade and to store foreign reserves. For decades, the dollar has been the world's most widely used currency. Many governments hold a large portion of their reserves in dollars.
Crude oil and many commodities are priced in dollars. Business deals around the chinese bitcoin exchange to shut downone news page video are done in dollars.
But the financial crisis has highlighted how America's economic problems — and by extension the dollar — can wreak havoc on nations around the world.
China is in a bind. To keep the value of its currency steady — some say undervalued — the Chinese government has to recycle its huge trade surpluses, and the biggest, most liquid option for investing them is U. To better insulate countries from the ills of one country or one currency, Zhou said the IMF should create a "reserve currency" based on shares in the body held by its member nations, known as special drawing rights, or SDRs.
He said it also should be used for trade, pricing commodities and accounting, not just government finance. And the European Union's top economy official said the dollar's role as the international reserve currency is secure despite China's proposal.
Zhou also called for changing how SDRs are valued. Currently, they are based on the value of four currencies — the dollar, euro, yen and British pound.
Beijing has been unusually bold in recent months in expressing concern about Washington's financial management and pushing for global economic changes. That reflects both its relative financial health and growing concern that increased globalization means missteps abroad could harm its own economy.
Zhou's comments are also part of China's longstanding push to reform the IMF, World Bank and global financial system to give chinese bitcoin exchange to shut downone news page video voice to China and other developing economies — another theme that will be heard from China, Brazil, Russia and India at the summit of Group of 20 major economies next week.
For instance, being the world's third-largest economy and the largest foreign reserves holder, China should get its due place in the monetary body.
Another idea Yi raised was that the U. The idea of a creating a new global reserve currency isn't new. But analysts say the proposal isn't likely to gain much traction because it faces major obstacles. It would require acceptance from nations that have long used the dollar and hold huge stockpiles of the U. Managing such a currency would require balancing the contradictory needs of countries with chinese bitcoin exchange to shut downone news page video and low growth or with trade surpluses or deficits, Pettis said.
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