China calls for World Currency

[Sam Carana]

China recently called for a World Currency, or global reserve
currency, to be operated by the International Monetary Fund (IMF) via
the its Special Drawing Rights (SDR).

The governor of the People’s Bank of China, Zhou Xiaochuan, said that
the SDR had the features and potential to act as a super-sovereign
reserve currency, adding that the SDR, which is now only used between
governments and international institutions, could become a widely
accepted means of payment in international trade and financial
transactions.

The SDR were created by the IMF in 1969 to support the Bretton Woods
fixed exchange rate regime. Today, the value of SDRs is based on a
basket of four currencies – the US dollar, yen, euro and sterling.
Zhou called for this basket to be expanded to include currencies of
all major economies.

Zhou further called the creation of financial assets denominated in
the SDR and for the SDR to be used in international trade, commodities
pricing, investment and corporate book-keeping.

China now holds $1.95 trillion of foreign exchange reserves and $1.4
trillion of this in U.S. Treasuries. Obviously, China is concerned
about devaluation of the $US. An IMF-controlled world currency could
be a major issue to be discussed at upcoming G20 meeting in London on
April 2nd.

Russia is may well support such an IMF-controlled currency. Ditch the
DollarIn a March 16 statement, the Kremlin said: "The International
Monetary Fund should investigate the possible creation of a new
reserve currency, widening the list of reserve currencies or using its
already existing Special Drawing Rights, or SDRs, as a 'superreserve
currency accepted by the whole of the international community,' the
Kremlin said in a statement issued on its web site," as reported by
the Moscow Times.

Stock was proposed as an alternative in the article Ditch the Dollar
by Sam Carana in late 2007.

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