China Says Dollar to Remain Leading World Currency

Looks like China wants to keep the US dollar as the worlds leading reserve currency, at least for the time being!

China says dollar to remain leading world currency

* Vice minister sees dollar pre-eminence for years to come

* Idea of new reserve currency is 'academic discussion'

* China appreciates U.S. govt efforts for stable dollar

ROME, July 5 (Reuters) - Chinese Vice Foreign Minister He Yafei said on Sunday the U.S. dollar would continue to be the world's leading reserve currency for years to come.

"The U.S. dollar is still the most important and major reserve currency of the day, and we believe that that situation will continue for many years to come," He told a news briefing in Rome before this week's Group of Eight summit.

Beijing has floated the idea of an alternative to the dollar as global reserve currency and wants the topic broached at the summit starting in Italy on Wednesday.

I'm SURE that this statement from China also has a lot to do with the huge amount of U.S. Treasury bonds that China holds, they would rather see the US dollar bounce back and remain the reserve currency so they could recover more of the money that they have invested in these bonds!

He said discussion about reserve currencies had intensified since the outbreak of the global financial crisis, which he said had revealed "many shortcomings in the international monetary system".

However, he described this as an intellectual debate.

"You may have heard comments, opinions from academic circles about the idea of establishing a super sovereign currency. This is all, I believe, now a discussion among academics. It is not the position of the Chinese government."

This can only be "good" for the US dollar that China is not on the bandwagon that wants to change the worlds reserve currency to something besides the US dollar!

But they (China) also re-iterated that, some day there just might be a new world reserve currency!

Zhou Xiaochuan, head of the Chinese central bank, launched the reserve currency debate last March when he said the SDR, the International Monetary Fund's unit of account, might one day displace the dollar.

So, is this Bejing showing confidence in the US dollars future, or just trying to protect it's huge holdings in US dollars?

Some diplomats and bankers suggest Zhou's primary aim was to highlight attention on concern expressed by Premier Wen Jiabao about the safety of China's huge dollar holdings -- at risk if U.S. policy turns to greater tolerance of inflation.

Bankers reckon China holds perhaps 70 percent of its $1.95 trillion in official currency reserves in the dollar.

[edit on 7/6/2009 by Keyhole]

Originally posted by Keyhole
So, is this Bejing showing confidence in the US dollars future, or just trying to protect it's huge holdings in US dollars?

Yeah well...

they have been calling for a new reserve currencies for years not months. They and Russia and a few other countries. They floated the idea several times. It went over like a fart in Church, now they are back peddling. Of course they want to protect their investment in the US.

I agree someday there should be a new reserve currency. When that happens it will be a hit to American prestige but in the long run it would do wonders for our economy.

You know for some reason I thought this would have gotten more attention. I guess not enough gloom and doom for the US of A

I noted that the Chinese were intending to buy some $80 Billion in gold bullion.

They're keeping the entire amount of gold they produce in-country, which is significant, and are trying to improve their reserves by purchasing other sources.

Recently when the world bank offered to sell a few tons, it was India and China I believe, who suggested they sell the entire 3200 tons or so.

You see, if you want to be the world's standard for reserve currency, you have to have an entire ass-load of that pretty yellow stuff.

The time is not right yet for China to push their agenda. Right now they hold too many dollars, and too little gold.

That too, will change if the American President and Congress don't have the courtesy to commit suicide to help the American people.

It only makes sense that China sais that, but we cannot really conclude anything from it.

If they wanted to get rid of USD, they would still claim to support it while selling the bonds... If they said they want to GET RID of USD they would just drive down the price and make the transition to a new reserve currency (whatever it would be) more costly for themselves..