China suggests replacing dollar as reserve currency

SHANGHAI, March 24, 2009 (AFP) - China's central bank said it wants to replace the US dollar as the international reserve currency with a new system run by the International Monetary Fund (IMF).

People's Bank of China Governor Zhou Xiaochuan wrote on the bank's website that the goal is to stabilise the international economic system by creating a system not easily influenced by the policies of individual countries.

"The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," Zhou wrote in an essay posted on Monday.

China relies on the US dollar-dominated monetary system, which has raised concerns over what impact Washington's moves to help the US economy could have on China's 1.95 trillion dollars in foreign exchange reserves.

Zhou's comments come ahead of the G20 summit that starts on April 2 in London, where world leaders and international organisations including the IMF are to discuss reforming the financial system.

Russia has also proposed the summit discuss creating a supranational reserve currency.

Zhou suggested the IMF's Special Drawing Rights, or SDR, could serve as a super-sovereign reserve currency.

The IMF created the SDR as an international reserve asset in 1969, but it is only used by governments and international institutions.

"The reform should be guided by a grand vision and start with specific deliverables," Zhou wrote. "It should be a gradual process that yields win-win results for all."

Source: AFP

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