China revives dollar debate

		China is proposing to replace the dollar with the International Monetary Fund's Special Drawing Rights based on a basket of currencies as a super-sovereign currency. -- PHOTO: AFP

BEIJING - CHINA raised the stakes in itslong-haul drive to unseat the dollar as the world's dominant currency, seeking a debate on an alternative reserve regime at next week's Group of Eight (G-8) summit.

The global financial crisis set off by the bursting of the US housing bubble nearly two years ago yielded new urgency to calls from emerging powers for a new currency system that would reflect the shifting balance of power in the globalised economy.

G-8 sources told Reuters that Beijing has asked to debate its proposals at the summit in Italy and the issue could be mentioned in the summit statement. China's deputy foreign minister said on Thursday he was unaware of such a request, but that it would be 'normal' for the issue to be raised during the meeting.

'This financial crisis has fully exposed some shortcomings in the international monetary system,' Mr He Yafei said. 'Of course we hope that in the future the international monetary system can diversify,' he told a news briefing in Beijing.

Trillions of dollars committed by US authorities to revive the sagging economy fanned fears of inflation that would erode the value of dollar assets held by official and private institutions around the world.

China, which holds more US Treasury debt than other countries has been particularly vocal, proposing to replace the dollar with the International Monetary Fund's Special Drawing Rights (SDRs) based on a basket of currencies as a super-sovereign currency.

Analysts believe any move away from the dollar would be slow and the report about Beijing's request only temporarily dented the US currency ahead of US jobs data.

The influential payrolls report due at 8.30pm is expected to show the world's biggest economy lost 363,000 jobs in June, up from 345,000 in May, bringing the unemployment rate to a 26-year high of 9.6 per cent from May's 9.4 per cent.

Markets are, however, wary of a negative surprise after Wednesday's news that private sector job cuts last month exceeded expectations reaching nearly half a million.

In Europe, May labour statistics are expected to show euro zone jobless rate creeping up to 9.4 per cent from 9.2 per cent, near a 10-year high. Rising unemployment is emerging as the biggest challenge to recovery, which governments' around the world are trying to stoke with record low interest rates and by pumping trillions of dollars into their economies. link.....