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China has directly challenged the authority of the U.S. dollar as the key currency, as the U.S. turns to quantitative easing -- or printing money -- to solve its immediate economic troubles. China seems unwilling to sit idle and watch the value of its foreign reserves drop. China holds some US$2 trillion, more than two-thirds of which are in U.S. dollar assets, including U.S. treasury bonds.
Zhou Xiaochuan, the governor of the People's Bank of China, on Monday called for the U.S. dollar to be replaced with a supranational global currency. "If a certain country's currency plays a role as the key currency, that country's domestic monetary policy needs will inevitably clash with other countries' demand."
Zhou added, "It's impossible to provide enough money for the entire world to spend and maintain the currency value at the same time. If the country which issues the key currency attempts to stimulate its domestic economy excessively, the entire world will overflow with money."
Though he did not mention the U.S. dollar directly, he was clearly aiming his criticism at the U.S. Federal Reserve Board for deciding to print dollars to solve the $1.15 trillion-worth insolvency crisis. He also stressed the need to strengthen the International Monetary Fund as an alternative to the Fed. He called for supplying countries in need with funds through special drawing rights (SDR) from the IMF.
(englishnews@chosun.com )
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