[QODLink]
Business
China calls for new global currency
China bank chief says crisis has exposed danger of relying on one nation's currency.
Last Modified: 24 Mar 2009 08:52 GMT

Zhou did not mention the dollar by name but said the financial crisis had shown the need for reform [EPA]

The head of the Chinese central bank has called for a new global currency controlled by the International Monetary Fund (IMF), saying such a move would give governments particularly in the developing world the ability to manage their economies more efficiently.

In an online essay Zhou Xiaochuan, governor of the People's Bank of China, said the global financial crisis had exposed the danger of relying on one nation's currency for international payments.

The essay, released on the bank's website late on Monday, did not mention the US dollar by name, but the vast majority of international finance is carried out in dollars.

 

The comments come ahead of a major meeting of leaders from the Group of 20 major economies in London which will focus on measures to alleviate the global economic crisis.

"This will significantly reduce the risks of a future crisis and enhance crisis management capability"

Zhou Xiaochuan,
governor of the People's Bank of China

During the meeting, beginning on April 2, China is expected to call for developing economies to have a bigger say in global finance and step up pressure for changes to a system dominated by the US dollar and Western governments.

The unusual step of publishing Zhou's essay in both Chinese and English versions is seen as indicating his comments are aimed at an international audience ahead of the G20 meeting.

China has become increasingly assertive in economic issues and while the global financial crisis has hit Chinese export industries hard, its leaders are also viewing the crisis as a potential opportunity to increase China's global clout.

'Creative reform'

In his essay Zhou said the financial crisis had shown the need for "creative reform of the existing international monetary system towards an international reserve currency".

Zhou said a new global currency should be controlled by the IMF [EPA]
A reserve currency is the unit of denomination in which a government holds its reserves.

Zhou said the proposed new currency should also be used for trade, investment, pricing commodities and corporate bookkeeping.

He said the new currency should be based on shares in the IMF held by its 185 member nations, which are known as special drawing rights (SDRs).

The Washington-based IMF advises governments on economic policy and lends money to help with balance-of-payments problems.

In his essay Zhou said the new currency would let governments manage their economies more efficiently because its value would not be influenced by the needs of any one nation to regulate its own finance and trade.

"A super-sovereign reserve currency managed by a global institution could be used to both create and control global liquidity," he wrote, adding the changes would ""significantly reduce the risks of a future crisis and enhance crisis management capability."

The fallout from the financial crisis has underscored long-standing unease in Beijing about China's reliance on the dollar for the bulk of its trade and to store foreign reserves.

Earlier this month Wen Jiabao, the Chinese premier, publicly appealed to Washington to avoid any steps that might erode the value of the dollar and Beijing's estimated $1 trillion holdings in Treasuries and other US government debt.

Source:
Agencies
Topics in this article
People
Country
Organisation
Featured on Al Jazeera
More than one-quarter of Gaza's population has been displaced, causing a humanitarian crisis.
Ministers and MPs caught on camera sleeping through important speeches have sparked criticism that they are not working.
Muslim charities claim discrimination after major UK banks began closing their accounts.
Italy struggles to deal with growing flood of migrants willing to risk their lives to reach the nearest European shores.
Featured
Friends of Steven Sotloff, allegedly the second journalist shown in Islamic State beheading video, call for his release.
Cut off from bulk of Tunisia's economic development, residents of rural towns are creating their own opportunities.
Craft breweries see rising sales, challenging large corporations for a bigger taste of Mexico's $20bn beer market.
Questions of colonialism after Malawi opts for English as medium of instruction in schools rather than local languages.
Frustration grows in Kiev as pledges to end corruption and abuse of power stagnate after Maidan Square protest.
join our mailing list