China calls for the reign of the dollar to end
China has called for the eventual replacement of the dollar as the world’s reserve currency, in a sign of its growing concern about the dominant role played by the US in the global economy.
The bold proposal, just days before world leaders gather in London to discuss the financial crisis at the G20 meeting, was made by the head of the Chinese central bank.
In an essay published both in Chinese and English on the bank’s website, Zhou Xiaochuan argued that cost of using the dollar as a global reserve currency “may have exceeded its benefits”. Mr Zhou’s essay comes days after the US announced that it would buy back as much as $300bn (£20bn) of Treasuries and $1 trillion of illiquid bank assets.
Since the Federal Reserve is likely to print more money to finance the purchase of the Treasuries, it could weaken the dollar and further devalue China’s $1.95 trillion of foreign reserves.
Earlier this month Wen Jiabao, the Chinese prime minister, said that he was « worried » about the safety of China’s dollar assets, and urged the US to « stay a credible nation ».