Terming the “the current international currency system is the product of the past”; Chinese President Hu Jintao questioned the relevance of US Dollars as the dominant global currency.
Mr. Jintao also subtly criticized the latest Federal Reserve move to pump in more liquidity in the system by the second round of quantitative easing.
“The monetary policy of the United States has a major impact on global liquidity and capital flows and therefore, the liquidity of the US dollar should be kept at a reasonable and stable level”, said Hu. He was commenting on questions raised by the two US newspapers – the Wall Street Journal and the Washington Post, on the eve of his scheduled visit to Washington.
The comments indicate China’s effort to internationalise its own currency, the Renminbi. Knowing that the difficulties that lie ahead, he said: “making the RMB an international currency will be a fairly long process”.
The country’s public relations is generally handled by its suave-talking Prime Minister Wen Jiabao and the media elusive President’s current interview is being viewed as a deliberate political move.
Acknowledging that thorny issues remain in the US-China relation, Mr. Hu said: “There is great potential for our mutually beneficial cooperation both in advancing Asia-Pacific regional co-operation and in improving global economic governance and promoting sustainable growth of the world economy”.
Observing that structural defects in the global banking system led to the current meltdown, he said: “Its root cause lies in the serious defects of the existing financial system”.
Mr. Hu will be hosted to a state dinner, an honour generally reserved for Washington’s friends and allies or whom it attaches political and financial importance.