Dollar's status under attack from China - by Sean O'Grady
Another skirmish in the war of words in the most important economic relationship in the world – that between the US and China – broke out yesterday, as the Governor of the People's Bank of China called for reform of the IMF and the promotion of the fund's own longstanding but underused "world currency"– special drawing rights (SDR).
His remarks come as the managing director of the International Monetary Fund said that any plans, such as those being pursued by the G20, to stimulate the world economy would fail unless the banking system is repaired. Dominique Strauss-Kahn said: "You can put in as much stimulus as you want. It will just melt in the sun as snow if, at the same time, you are not able to have a generally smaller financial sector than before but a healthy financial sector at work." Zhou Xiaochuan, the governor of the Chinese central bank, implicitly criticized the status of the dollar as the world's sole reserve currency. "The price is becoming increasingly high, not only for the users, but also for the issuers of the reserve currencies," Mr Zhou said.
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