China hopes for diversification of the international currency system in the future, and it would be “normal” for the issue to be raised for discussion at next week’s G8 summit, Chinese Vice Foreign Minister He Yafei (何亞非) said yesterday.
Speaking at a news briefing ahead of Chinese President Hu Jintao (胡錦濤) attending a G8 summit in Italy next week, He said he was not aware of reports that China had requested a debate about global reserve currencies.
G8 sources said on Wednesday that Beijing had asked for a debate on proposals for a new global reserve currency at the G8 summit and the issue could be referred to briefly in the summit statement.
The news pushed down the greenback, which is particularly sensitive to comments from China because bankers estimate Beijing holds perhaps 70 percent of its US$1.95 trillion in official currency reserves in US dollars.
“I have not heard that China has this request,” He said in response to a reporter’s question about the matter.
But he also flagged that Beijing expected the issue to be discussed at the G8 meeting.
“This financial crisis has fully exposed some shortcomings in the international currency system,” He said. “Of course we hope that in the future the international currency system can diversify.
“I think this is an objective that the international community naturally wants to realize and as I just said, if in the meetings some leader raises this issue for discussion, that would be normal,” He said.
China’s central bank last week renewed its call for the creation of a super-sovereign reserve currency to reduce the dollar’s global domination, which it said had worsened the crisis.
Hu has not made any public statement about the idea for a new reserve currency.
The People’s Bank of China caused a stir with its suggestion, first made in March, that the IMF’s Special Drawing Right (SDR) could eventually displace the dollar as the principal reserve currency.
The SDR is an international reserve asset allocated to IMF members and its exchange rate is determined by a basket of dollars, euros, sterling and yen.
“At present the US dollar is the main reserve currency,” He said. “We of course hope the exchange rate of the main reserve currency maintains stability.”
Chinese officials have expressed growing concern in recent months that massive US fiscal and monetary stimulus will generate inflation and drive down the dollar, handing Beijing big losses on its vast portfolio of US bonds.
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