China called for a more diversified international currency system on Thursday that may pose a challenge to the US dollar's role as the world's reserve currency. Speaking in L'Aquila, Italy, where leaders from the Group of Eight (G8) industrialised nations and five leading emerging economies are holding a summit, Dai Bingguo, China's state councillor, said the international currency regime must become more diversified.
According to a Chinese official, Mr Dai told leaders: "There's a need to improve the international monetary system, enhance the reserve currency and regulating regime, maintain a relative stability of the exchange rates of the main international reserve currencies, and promote a more diversified and reasonable international currency system." Large developing nations have long advocated a more prominent role for currencies other than the dollar. China is the world's largest holder of US government debt and rescue measures introduced during the financial crisis have made the Chinese wary of the power the US exercises over the value of its dollar-denominated assets.
Brazilian and Russian leaders have made similar suggestions to try to reduce their exposure to the dollar. But Robert Gibbs, the White House press secretary, yesterday countered suggestions that the dollar might be under threat. "Despite whatever talk you might have heard, I don't see that there is movement away from the notion of the dollar being that [global reserve] currency," Mr Gibbs said in L'Aquila.
But the leaders did agree to "refrain from competitive devaluations of our currencies", according to the draft of a statement to be released after the summit. They also agreed to "promote a stable and well-functioning international monetary system". The leaders discussed an agreement to cap global temperatures at just 2°C above pre-industralisation levels and efforts to reduce volatility in energy prices to promote sustainable energy investment.
Also under discussion was the stalled Doha round of world trade talks, which leaders hope to restart ahead of the next summit of the Group of 20 leading and emerging economies in September. afitch@thenational.ae * with agencies
