China demands reform of reserve currencies at G8

By Simon Rabinovitch

L'AQUILA, Italy (Reuters) - China on Thursday called for reform of the global reserve currency system at a meeting of G8 rich nations and G5 developing powers in one of its most direct attacks yet on the dollar's dominance in the world economy.

Although Chinese State Councillor Dai Bingguo did not name the dollar at the summit in Italy, he was unequivocal in calling for the world to diversify the reserve currency system and aim at relatively stable exchange rates among leading currencies.

Chinese ideas for changing the global reserve currency system had previously been mentioned in reports by its central bank, but had never been voiced in a speech by such a high-ranking political leader.

Adding potency to Dai's words were his audience, a room including U.S. President Barack Obama and the leaders of Japan, Britain and the European Union, whose currencies are also often held as part of countries' foreign exchange reserves.

"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," Dai said, according to a statement read by foreign ministry spokesman Ma Zhaoxu.

Dai was attending the G8 plus G5 meeting in place of President Hu Jintao, who returned home to monitor developments in the northwestern region of Xinjiang after 156 people were killed in the country's worst ethnic violence in decades.

There should be no question about whether Dai's comments represented the views of the country's top leadership, the spokesman, Ma, said.

"China's position on reserve currencies has had different interpretations, but I can tell you that what I have just quoted is the most authoritative standpoint of the Chinese government," he said.