China Calls For New Global Currency

China calls for new global currency controlled by International Monetary Fund.

ByABC News
March 24, 2009, 7:04 AM

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.