China Steps Up Calls To End US Dollar’s Reign As World’s Reserve Currency

As nations worldwide continue to fret over the U.S. budget impasse, China has once again called for the creation of a new international reserve currency to replace the U.S. dollar, in order for the world “to permanently stay away from the spillover of the intensifying domestic political turmoil in the U.S.”

As nations worldwide continue to fret over the U.S. budget impasse, China has once again called for the creation of a new international reserve currency to replace the U.S. dollar, in order for the world “to permanently stay away from the spillover of the intensifying domestic political turmoil in the U.S.”

In a blistering op-ed piece this week, the state-owned Xinhua News Agency blasted Washington for its “irresponsibility in handling global affairs” and “hypocrisy”; and called on the international community to start reconsidering America’s global financial role.

“As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world,” wrote Xinhua.

“Instead of honouring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies,” the paper added.

[quote]“Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing,” they further said.[/quote]

Chinese officials made similar noises four years ago, when the U.S. were in the middle of the financial crisis. In March 2009, the leader of China’s central bank, Zhou Xiaochuan, proposed creating a new “super-sovereign currency” that would diminish the importance of any individual national currency, not least the dollar.

“Several corner stones should be laid to underpin a de-Americanized world,” said Xinhua. The paper suggested that emerging economies should have more say in major international financial institutions such as the World Bank and the IMF, while reforms should be introduced in the world’s financial system in order to diminish the importance of the U.S. dollar.

Meanwhile, the Wall Street Journal on Tuesday reported that China’s foreign exchange reserves rose to a record $3.66 trillion in the third quarter this year. At least $1.3 trillion is in U.S. Treasury Holdings, explaining China’s nervousness over a potential U.S. debt default.

Edwin M. Truman, an economist and former Treasury Department official, described the Xinhua op-ed piece as typical “political blather.”

[quote]“It is a politically defensive response to the choices China has made,” Truman told the New York Times.[/quote]

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“The Chinese can blame themselves,” added Michael Schuman, the Asia business correspondent for TIME Magazine.

[quote]“Since the earliest days of Chinese economic reform, policies that the government has employed to create growth and exports have also made it dependent on debt issued by the U.S. Treasury. Those policies have generated huge current account surpluses and gargantuan reserves of foreign currency that have left Beijing no other option but to invest in the U.S.,” Schuman said.[/quote]