China calls for new international currency reserve to replace the dollar

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. Russia recently made a similar proposal.

Zhou Xiaochuan, governor of the People’s Bank of China, said a new currency reserve system controlled by the International Monetary Fund could prove more stable and economically viable. A new system is necessary, he said, because the global economic crisis has revealed the “inherent vulnerabilities and systemic risks in the existing international monetary system.”

China’s bold idea, released more than a week before world leaders are to meet in London for a global economic summit, also indicates that Beijing is worried that its huge dollar-denominated foreign reserves could lose significant value.

The New York Times