By staff reporter Guo Xiaohong
Chinese and overseas experts attending the 2009 Summer Davos meeting called yesterday for major reform of the international currency system to reduce dependence on the US dollar. The experts were taking part in a discussion "Asia's Foreign Currency Exposure: Buy, Hold or Sell?", at the Annual Meeting of New Champions 2009, better known as the Summer Davos, which concluded yesterday in the port city of Dalian in northeast China's Liaoning Province.
IMF Special Drawing Rights (a basket of dollars, euros, pounds and yen) should be used as a means of payment in bilateral trade, said Yu Yongding, a former adviser to the People's Bank of China, the country's central bank. In the wake of the global financial crisis there have been many calls for the use of SDR to settle international trade payments as a substitute for the US dollar.
A sharp devaluation of the US dollar could put world economy at risk again, warned Stephen S. Roach, a senior executive with New York-based investment bank Morgan Stanley.
Kiat Sittheeamorn, Deputy Prime Minister of Thailand and the country's trade representative, said the world should draw lessons from the financial crisis and reform the international currency system to prevent a repetition.
"China has put itself in a US dollar trap by holding huge dollar reserves. In addition to economic structural readjustment, China needs to diversify its foreign reserves," said Yu. "It's natural to choose a verified investment if dollars have no stable asset value."
Participants in the session also debated the internationalization of the Chinese yuan. There was consensus that the yuan is far from ready to achieve reserve currency status or even become a fully convertible currency. In the future it may become a major international currency, but is unlikely to be the dominant foreign reserve currency.
China has been trying to reduce its reliance on the dollar in other ways. Since December 2008, it has signed currency swap agreements with a combined value of over 650 billion yuan with South Korea, Argentina, Belarus, Indonesia, Malaysia, and China's Hong Kong, and is encouraging its trading partners to use yuan to settle cross-border trade in Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan. China has also allowed Hong Kong institutions to issue yuan-denominated bonds.
Profile of World Economic Forum:
The WEF was founded in 1971 as an independent organization committed to improving the state of the world by helping form partnerships to shape global, regional and industrial agendas.
Business members and partners are at the heart of the WEF. Members include 1,000 of the world's foremost companies, encompassing regional market leaders and organizations shaping the future of their industries.
The small Swiss town of Davos is famous for hosting the annual World Economic Forum's (WEF) winter summit. China's northeastern port of Dalian hosted the first and is hosting the third annual meeting of Global Growth Companies (GGC), known as the "Summer Davos." Tianjin hosted the second Summer Davos in 2008.
(China.org.cn September 13, 2009)