Finance officials from Beijing in Moscow on Thursday held a videoconference to discuss the creation of a "supra-national reserve currency," the latest evidence of the support China is getting from developing countries as it seeks to replace the U.S. dollar as the world's main reserve currency.
This controversial proposal - and the support that it's getting - also underscores China's continued emergence as a growing global force in both the financial and political arenas. That's a trend that successful global investors won't be able to ignore.
The recent torrent of criticism to swirl around the dollar began with remarks by Chinese Premier Wen Jiabao. Speaking last month at a press conference leading up to the recent Group 20 meeting in London, Premier Wen voiced his concern about the value of China's large holdings of U.S. Treasuries.
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On the eve of the G-20 summit, Zhou Xiaochuan, governor of the People's Bank of China, released an essay entitled "Reform of the International Monetary System" on the BOC's Web site.
Without explicitly mentioning the U.S. dollar, People's Bank Gov. Zhou asked what kind of international reserve currency the world needs in order to secure global financial stability and facilitate economic growth.
According to Zhou, the dollar's unique status as the world's primary currency reserve has resulted in increasingly frequent financial crises ever since the collapse of the Bretton Woods system in 1971.
"The price [of relying solely on the dollar] is becoming increasingly higher, not only for the users, but also for the issuers of the reserve currencies," Zhou said. "Although crisis may not necessarily be an intended result of the issuing authorities, it is an inevitable outcome of the institutional flaws."
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