BEIJING, China, 24 Mar, 2009— -- China is calling for a new global currency controlled by the International Monetary Fund, stepping up pressure ahead of a London summit of global leaders for changes to a financial system dominated by the U.S. dollar and Western governments.
The comments, in an essay by the Chinese central bank governorreleased late Monday, reflects Beijing's growing assertiveness ineconomic affairs. China is expected to press for developingcountries to have a bigger say in finance when leaders of the Groupof 20 major economies meet April 2 in London to discuss the globalcrisis.
Gov. Zhou Xiaochuan's essay did not mention the dollar by namebut said the crisis showed the dangers of relying on one nation'scurrency for international payments. In an unusual step, the essaywas published in both Chinese and English, making clear it wasmeant for an international audience.
"The crisis called again for creative reform of the existinginternational monetary system towards an international reservecurrency," Zhou wrote.
A reserve currency is the unit in which a government holds itsreserves. But Zhou said the proposed new currency also should beused for trade, investment, pricing commodities and corporatebookkeeping.
Beijing has long been uneasy about relying on the dollar for thebulk of its trade and to store foreign reserves. Premier Wen Jiabaopublicly appealed to Washington this month to avoid any steps inresponse to the crisis that might erode the value of the dollar andBeijing's estimated $1 trillion holdings in Treasuries and otherU.S. government debt.
The currency should be based on shares in the IMF held by its185 member nations, known as special drawing rights, or SDRs, theessay said. The Washington-based IMF advises governments oneconomic policy and lends money to help with balance-of-paymentsproblems.
Independent economists have suggested creating a new reservecurrency to reduce reliance on the dollar but acknowledge thatwould face obstacles. It would need acceptance from governmentsthat have relied on the dollar for decades and hold huge stockpilesof U.S. currency.
China has pressed for changes to give developing countries moreinfluence in the IMF, the World Bank and other finance bodies. G20finance officials issued a statement at their last meeting callingfor such changes but gave no details of how that might happen.
Russia also has called for such reforms and says it will pressits case at the London summit.
Zhou said the new currency would let governments manage theireconomies more efficiently because its value would not beinfluenced by any one nation's need to regulate its own finance andtrade.
"A super-sovereign reserve currency managed by a globalinstitution could be used to both create and control globalliquidity," Zhou wrote. "This will significantly reduce the risksof a future crisis and enhance crisis management capability."
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.
"The basket of currencies forming the basis for SDR valuationshould be expanded to include currencies of all major economies,"Zhou wrote. "The allocation of the SDR can be shifted from apurely calculation-based system to one backed by real assets, suchas a reserve pool, to further boost market confidence in itsvalue."