Top banker proposes setting new global reserve currency

(Xinhua)
Updated: 2009-03-24 14:03

BEIJING -- Zhou Xiaochuan, governor of China's central bank, has proposed to create a super-sovereign reserve currency as part of reform in the international monetary system.

The desirable goal of the international monetary system is to "create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies," he said.

Zhou said the Special Drawing Right (SDR) of the International Monetary Fund (IMF) has the potential to act as a super-sovereign reserve currency in a signed article posted on the website of the People's Bank of China Monday.

The SDR is an international reserve asset created by the IMF in 1969.

The ongoing financial crisis is a testimony to the inherent deficiencies of current monetary system of the world, he said.

He admitted the creation of a new reserve currency is a long-term goal that requires foresight and courage from state leaders of various countries.

"In the short term, monitoring, evaluation, and early warning mechanisms should be strengthened against risks of the current system on condition that the international community, especially the IMF, acknowledges such risks," he added.

Zhou's remarks came ahead of the G20 summit slated to start in London on April 2, when leaders across the world and large international organizations like the IMF are expected to discuss reforming of the international monetary and financial system in light of the current crisis.

Last week, Russia announced a similar call for the introduction of a super-national reserve currency as part of the country's proposal to reform the international monetary and financial system at the upcoming London summit.