China’s central bank governor has issued a bold proposal to overhaul the global monetary system and one day replace the dollar as the world’s main reserve currency with the International Monetary Fund's (IMF) Special Drawing Right

Zhou Xiaochuan, governor of the People’s Bank of China, argued that what he called a super-sovereign reserve currency would not only eliminate the risks inherent in currencies such as the dollar, which are backed only by the credit of the issuing country and not by gold or silver, but would also make it possible to manage global liquidity.

The Special Drawing Right (SDR) is an international reserve asset created by the International Monetary Fund in 1969 that has the potential to act as a super-sovereign reserve currency, he said.

Careful not to refer explicitly to the dollar, Mr Zhou said: “The role of the SDR has not been put into full play due to limitations on its allocation and the scope of its uses. However, it serves as the light in the tunnel for the reform of the international monetary system."

It was unlikely to be a coincidence that his speech was published just before leaders of the world’s developed and emerging economies gather in London on April 2 for a Group of 20 summit.

However, reform of the international monetary system is likely to take a back seat to the more urgent task of economic and financial stabilisation.

However, his remarks spell out Beijing's dissatisfaction with the primacy of the US currency, which Zhou said has led to increasingly frequent global financial crises since the collapse in 1971 of the Bretton Woods system of fixed but adjustable exchange rates.

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