In another indication that China is growing increasingly concerned about holding huge dollar reserves, the head of its central bank has called for the eventual creation of a new international currency reserve to replace the dollar, sweeping away a decades-old system to stabilize the world monetary climate and protect its massive forex reserves.
People’s Bank of China Governor Zhou Xiaochuan (周小川) said he wants to replace the dollar, installed as the reserve currency after World War II, with a different standard run by the IMF.
China, the top holder of US Treasury bonds with US$739.6 billion as of January, has already voiced concern over its investment as the world’s largest economy battles a deep recession.
“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 the bank’s Web site in English and Chinese on Monday.
Zhou’s comments come ahead of the G20 summit in London, where world leaders are to discuss reforming the financial system.
He suggested the IMF’s Special Drawing Rights (SDR) could serve as a super-sovereign reserve currency as it would not be easily influenced by the policies of individual countries.
The IMF created the SDR as an international reserve asset in 1969, but it is only used by governments and international institutions.
Russia has also proposed the summit discuss creating a supranational reserve currency.
China has the largest foreign-exchange reserves in the world, valued at nearly US$2 trillion, with more than half of those holdings reportedly made up of US Treasuries and dollar-denominated bonds.
On March 13, Chinese Premier Wen Jiabao (溫家寶) said he was concerned about the safety of those assets, particularly because huge economic stimulus plans could lead to soaring deficits in the US.
Nicholas Lardy, an economist and China specialist at the Peterson Institute in Washington, said that by making such a proposal, China was indicating that the dollar’s longstanding dominance was inherently unfair, allowing the US to run huge deficits by borrowing from abroad.
“Chinese are quite concerned that the large US government deficits will eventually lead to inflation, which will erode the purchasing power of the dollar-denominated financial assets which they hold,” Lardy said. “It is a legitimate concern.”
“It’s a sad situation: China is America’s banker. America owes so much to China, but it’s not afraid of China,” Shanghai-based economist Andy Xie (謝國忠) said. “China is America’s hostage.”
Japan has deployed long-range missiles in a southwestern region near China, the Japanese defense minister said yesterday, at a time when ties with Beijing are at their lowest in recent years. The missiles were installed in Kumamoto in the southern region of Kyushu, as Japan is attempting to shore up its military capacity as China steps up naval activity in the East China Sea. “Standoff defense capabilities enable us to counter the threat of enemy forces attempting to invade our country ... while ensuring the safety of our personnel,” Japanese Minister of Defense Shinjiro Koizumi said. “This is an extremely important initiative for
Chinese Nationalist Party (KMT) Chairwoman Cheng Li-wun (鄭麗文) today accepted an invitation from Chinese President Xi Jinping (習近平) to lead a delegation to China next month, saying she hopes to promote the peaceful development of cross-strait relations and bring stability to the Taiwan Strait. “I am grateful and happy to accept this invitation,” Cheng said in a statement from the KMT chairperson’s office. Cheng said she hopes both sides can work together to promote the peaceful development of cross-strait relations, enhance exchange and cooperation, bring stability to the Taiwan Strait and improve people’s livelihoods. At today's news conference, Cheng said any efforts to
MORE POPULAR: Taiwan Pass sales increased by 59 percent during the first quarter compared with the same period last year, the Tourism Administration said The Tourism Administration yesterday said that it has streamlined the Taiwan Pass, with two versions available for purchase beginning today. The tourism agency has made the pass available to international tourists since 2024, allowing them to access the high-speed rail, Taiwan Railway Corp services, four MRT systems and four Taiwan Tourist Shuttles. Previously, five types of Taiwan Pass were available, but some tourists have said that the offerings were too complicated. The agency said only two types of Taiwan Pass would be available, starting from a three-day pass with the high-speed rail and a three-day pass with Taiwan Railway Corp. The former costs NT$2,800
The nation’s fastest supercomputer, Nano 4 (晶創26), is scheduled to be launched in the third quarter, and would be used to train large language models in finance and national defense sectors, the National Center for High-Performance Computing (NCHC) said. The supercomputer, which would operate at about 86.05 petaflops, is being tested at a new cloud computing center in the Southern Taiwan Science Park in Tainan. The exterior of the server cabinet features chip circuitry patterns overlaid with a map of Taiwan, highlighting the nation’s central position in the semiconductor industry. The center also houses Taiwania 2, Taiwania 3, Forerunner 1 and
RSS