The next reserve currency
Last week’s G8 saw more rumblings of dissatisfaction from China about the US dollar’s continuing role as the world’s reserve currency: State Councillor Dai Bingguo said in a statement to the G8+5 that,
We should have a better system for reserve currency issuance and regulation, so that we can maintain relative stability of major reserve currencies’ exchange rates and promote a diversified and rational international reserve currency system.
This is the latest in a series of such statements from China, building on Wen Jiabao saying he was “worried” about China’s stash of US T-bills in March, central bank governor Zhou Xiaochuan‘s essay on reform of the international monetary system a couple of weeks later, and then China’s $120bn contribution to an Asian emergency currency pool in May – potentially an important step towards an “Asian IMF”.
So if / when the dollar does lose its perch as the world’s reserve currency – something that isn’t likely to happen in the short term, admittedly – then what are the candidates to replace it? (more…)