China: key currency countries need watching

Special Report: Boao Forum For Asia
2009

BEIJING, April 19 -- Premier Wen Jiabao said
on Saturday that the economic polices of countries which issue global reserve
currencies require closer supervision as part of building a diversified
international monetary system.

Wen and central bank governor Zhou Xiaochuan also cautioned against jumping
to the conclusion that China is already on the path to economic recovery, after
data issued on Thursday showed signs of an upturn in momentum.







Chinese Premier Wen Jiabao gives a
keynote speech at the opening plenary of Boao Forum for Asia (BFA) Annual
Conference 2009 in Boao, a scenic town in south China?ˉs Hainan Province,
April 18, 2009. The BFA Annual Conference 2009 opened here on Saturday
with the theme of ?°Asia: Managing Beyond Crisis?±. (Xinhua/Ma
Zhancheng)
Photo
Gallery>>>

Wen's currency comments, an apparent reference to U.S. economic management that
Beijing has blamed in part for the global financial crisis, were twinned with a
pledge to promote more international use of the Chinese yuan.

Wen has expressed concern in recent months about the
safety of Chinese investments in U.S. dollar assets.

"We should strengthen the supervision of the economic policies of the main
reserve currency economies and push forward the establishment of a diversified
international monetary system," he said in his opening address to the Boao Forum
for Asia, held annually in the Chinese island province of Hainan.

It was the second time this month that China has made such an appeal,
following President Hu Jintao's call at the London G20 summit earlier this month
for the International Monetary Fund to strengthen its oversight of reserve
currency-issuing economies.

Long-term Solutions

China caused a stir in March when central bank chief Zhou suggested the
idea of reducing reliance on the U.S. dollar as the world's primary unit of
foreign exchange by developing the Special Drawing Rights (SDRs) issued by the
IMF.

But at the London G20 forum, China did not call for immediate discussion of
the subject.

Speaking at the Boao forum on Saturday, Zhou said that his proposal on SDRs
was intended mainly to contribute his thoughts on the root cause of the
financial crisis and what needed to be done in the long run to prevent such
situations in the future.

He was not suggesting that drastic changes to the financial system needed
to be taken in the short term, Zhou said.

"It's just like treating a patient. First we need to make a diagnosis. Then
comes treatment," Zhou told the forum.

"But right now, not all the doctors have the same diagnosis....
Unfortunately, it seems that there is still no consensus among various countries
about the source of the financial crisis," he said.

Premier Wen said China would look at expanding its currency swap agreements
that are seen as a step toward eventually making the yuan more of a global
reserve asset.

"We should give full play to bilateral currency swap agreements and will
study expanding currency swaps in scale and to more countries," he said.

China's central bank has signed six swap deals since mid-December, totalling 650 billion yuan ($95 billion), with countries from Argentina to Indonesia.