2009 March 25 Wednesday
China Wants New Reserve Currency To Replace Dollar

Imagine what China will be like once its economy is double the size of the US economy.

BEIJING -- China called for the creation of a new currency to eventually replace the dollar as the world's standard, proposing a sweeping overhaul of global finance that reflects developing nations' growing unhappiness with the U.S. role in the world economy.

The unusual proposal, made by central bank governor Zhou Xiaochuan in an essay released Monday in Beijing, is part of China's increasingly assertive approach to shaping the global response to the financial crisis.

Such a move would make it harder for China to maintain a large trade surplus with the US. China's currency might some day replace the US dollar as the world's reserve currency. But such a turn of events would reduce the power of the Chinese government to control trade and economic growth in China.

The Chinese could try to turn a group of currencies into a replacement for the dollar. But such a grouping would be very hard to manage. What would be the initial ratio between the currencies and how might the ratio change as different economies grow at different speeds?

The growth of Chinese economic power makes me worry about what happens when the Chinese become unhappy with freedom of speech and press in other countries. China has cut off Youtube due to a video showing Chinese soldiers beating Tibetan monks.

Earlier in the week, the BBC reported from Beijing that China cut off access to the website because it carried a video showing soldiers beating monks and other Tibetans.

The graphic video was released by Tibetan exiles and showed hundreds of uniformed Chinese troops swarming through a Tibetan monastery. It included footage of a group of troops beating a man with batons.

Turkey bans Youtube even while trying to become a member of the European Union. The Euro countries should not let Turkey into the EU. Turkey isn't compatible with secular liberal democracies.

China is not alone in prohibiting access to YouTube. Over the years several other countries have done the same thing.

Earlier this month Bangladesh blocked the site for 36 hours after a video was posted showing a tense meeting between the prime minister and angry army officials after a mutiny by border guards in Dhaka that left more than 70 people dead.

The site is presently being blocked in Turkey.

Share |      By Randall Parker at 2009 March 25 11:24 PM  China

A. Prole said at March 26, 2009 2:56 AM:

The comments about banning youtube as some sort of gauge of democracy are ridiculous.
That 'mother of democracies' the UK is pretty shameless and ruthless in curtailing geuine political free speech and imprisoning people for the crime of uttering illegal word, therefore Randall I see this silly little example as merely hysterical, gratuitous China bashing and beneath your intelligence and dignity.
Another point.China only accumulated dollars because at one particular point in its economic development it needed a big fund of dollars to cover contigencies and imports - they were always mindful how the banksters of Wall Street destroyed one third world nation after another in speculating against debtor nations.
Now China has passed that particular stage and is bigger and stronger than the USA, the client/server reltonship has inverted completely.
China's great strength is the quality of their leadership.They steadfastly ignored with contempted the 'neo-liberal' bullshit that took the west by storm , in particular the hookworm infested lumps of shit masqueraing as human beings (in fact I have more respect for our nematode bretheren than the these sub-human hell-fiends), who write for the WSJ and Economist.

Anonymous said at March 26, 2009 8:58 AM:

I agree that the West is heavily censored. Black-on-white crime is almost completely "blacked out" in the media. Rarely does any crime make it to the national news. There are also many taboos regarding criticism. You will hear almost no words against the Jewish people, or the troops, or various minorities. I am sure there are other taboos that I haven't figured out yet.

Dragon Horse said at March 26, 2009 9:39 AM:

China is not serious about the IMF and SDRs...they are just sending a message, by Chinese standards, a strong one. They are greatly concerned. In 2008, about half of China’s total reserve accumulation of $400 billion went towards net purchases of U.S. treasury bills and bonds. They are afraid to get out of this crisis, the U.S. Federal Reserve will do what is best for America (what it thinks is best, basically devalue the currency) which will hurt China economically. They are resentful of this power (the Russians as well) as having the USD be the de facto international reserve currency makes borrowing cheaper for America and also creates a situation where the U.S. can be flexible with debt payment. The IMF SDRs already exist but very few people use them. Even if the world went with this, Randall is exactly right...how would you evaluate them? China will want more voting rights in the IMF (and everyone else will too) and they will pressure the institution to make allocations favorable to their specific nation. China knows this is a joke, if anything they are pragmatic to a fault. The real issue is that China is afraid and putting America on notice. Although the % of their export to America has been declining every years for about a decade, so has FDI from CHina...China investment in America has increased and their need for commodities (valued in USD) will only increase. China can't ween itself off it's USD dependence in the near future.

RKU said at March 26, 2009 10:18 AM:

Yes, indeed! For America and the West to condemn Chinese "censorship" is pretty ridiculous when viewed objectively.

It reminds me of the old joke about the Soviet citizen in 1937 who explained how he had complete freedom of speech, unlike those suffering under the Fascist yoke: "In Germany, anyone who shouts 'Down with Hitler!' is immediately dragged off by the Gestapo, while here in Russia I can shout 'Down with Hitler!' in complete safety...

Stephen said at March 27, 2009 12:46 AM:

The US can have a reserve currency or it can make stuff.

Reserve currency means you get free credit to buy stuff - but if you stop consuming you die.

Making stuff means you can have a manufacturing industry - but if you stop working you die.

...pick one because you can't have both

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