China is getting annoyed with all the US money printing, which is devaluing Chinas holdings in US dollars, and thus is calling for a new global currency……and who can blame them.

China is expected to press for developing countries to have a bigger say in finance when leaders of the Group of 20 major economies meet April 2 in London to discuss the global crisis.

Zhou Xiaochuan's recent essay said the crisis showed the dangers of relying on one nation's currency for international payments. In an unusual step, the essay was published in both Chinese and English, making clear it was meant for an international audience.

"The crisis called again for creative reform of the existing international monetary system towards an international reserve currency," Zhou wrote.

A reserve currency is the unit in which a government holds its reserves. But Zhou said the proposed new currency also should be used for trade, investment, pricing commodities and corporate bookkeeping.

China has long been uneasy about relying on the dollar for the bulk of its trade and to store foreign reserves.

Premier Wen Jiabao publicly appealed to Washington this month to avoid any steps in response to the crisis that might erode the value of the dollar and Beijing's estimated $US1 trillion ($1.4 trillion) holdings in Treasuries and other US government debt.

The currency should be based on shares in the IMF held by its 185 member nations, known as special drawing rights, or SDRs, the essay said.

Economists have suggested creating a new reserve currency to reduce reliance on the dollar but acknowledge that would face obstacles. It would need acceptance from governments that have relied on the dollar for decades and hold huge stockpiles of US currency.

China has pressed for changes to give developing countries more influence in the IMF, the World Bank and other finance bodies. G20 finance officials issued a statement at their last meeting calling for such changes but gave no details of how that might happen.

Russia also has called for such reforms. Zhou said the new currency would let governments manage their economies more efficiently because its value would not be influenced by any one nation's need to regulate its own finance and trade.

"A super-sovereign reserve currency managed by a global institution could be used to both create and control global liquidity, Zhou wrote." This will significantly reduce the risks of a future crisis and enhance crisis management capability.

Zhou also called for changing how SDRs are valued. Currently, they are based on the value of four currencies - the US dollar, euro, yen and British pound.

"The basket of currencies forming the basis for SDR valuation should be expanded to include currencies of all major economies, Zhou wrote." The allocation of the SDR can be shifted from a purely calculation-based system to one backed by real assets, such as a reserve pool, to further boost market confidence in its value.

Right after these comments the Australian Prime minister KEVIN RUDD scotched at suggestions by the governor of the People's Bank of China that the US dollar should lose its status as the world's key reserve currency.

The Prime Minister, whose approach to the crisis was branded "A-plus" yesterday by the Obama Administration, said the currency issue was not on the agenda of the G20 meeting in London.

"The dollar's position on that score remains unchallenged," he told a Wall Street Journal seminar in Washington. "It&'s not on my agenda papers and if there's a late Chinese edition I'll review it with respectful interest."

Russia already has proposed the G20 examine the creation of a new reserve currency and reportedly has the backing of a growing number of nations.

Mr Zhou's proposal, which economists consider unlikely to succeed, points to nervousness in China about $US2000 billion ($2840 billion) invested in the US, and a growing willingness to throw its weight around in international affairs.

"To me it is a case of dream on - it isn't going to happen," said Mervyn Lewis, a professor of finance at the University of South Australia.

Professor Lewis said the comments reflected China's frustration that by buying US government bonds, it was having to pay for the US attempt to spend its way out of the financial crisis.

China supported Russia’s initiative to develop a new global reserve currency as an alternative to the U.S, dollarsaying that such a move is necessary in today’s world. Moreover China is ready to discuss this issue at the G20 summit in London, a vice governor of the country's Central Bank said on Monday.

On the one hand Russia should be glad to have such a strong ally; on the other hand there likely will be no actions from the Chinese side because today China holds about $2 trillion in foreign exchange reserves.

"We believe it is necessary to consider the IMF's role in this process and also define the possibility and the need to adopt measures allowing for Special Drawing Rights (SDRs) to become an internationally recognized super-reserve currency," Russia's proposal read.

Hu Xiaolian said that China, which holds about $2 trillion in foreign exchange reserves, was prepared to debate the issue as "the dollar's dominance and U.S. economic woes could entail considerable currency fluctuations and affect the world financial situation."

The G20 summit, involving advanced and emerging economies and international financial institutions, will be held inLondon on April 2

China was indicating that the dollar’s long dominance was unfair, allowing the United States to run huge deficits by borrowing from abroad, and that the risks to holders of Treasuries were growing.

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