New doubts about China’s confidence in the U.S. dollar emerged yesterday as Zhou Xiaochuan, governor of the People’s Bank of China, released a statement calling for a new international currency reserve to replace the greenback. Mr. Zhou pointed out the shortcomings of the current dollar-dominated financial system and said a new currency reserve system controlled by the IMF could prove more stable. China currently holds about two-thirds of its almost $2 trillion foreign exchange reserves in dollar assets. In a second statement on Monday, the Central Bank’s vice governor assured China’s continuing commitment to the U.S. currency, aware that every change in China’s FX reserves strategy could result in significant devaluation of the greenback.
China’s State Council is expected to approve Shanghai’s bid to turn itself into an international finance and shipping center. The city’s proposal is currently going through routine reviews and already received informal nods by the State Council. The plan aims to establish finance laws, a taxation and credit system, a supervisory system, modern shipping systems, and tax cuts for related industries.
China’s increasingly aggressive stance in maritime encounters has sparked concerns about the country’s peaceful intentions. Territorial disputes in the South China Sea as well as in the East China Sea bear significant risks for peace in the region. International defense experts interpret China’s more aggressive naval actions in the last months as a sign for the country’s aspirations for expansion. Territorially disputed areas, such as the Spratly Islands in the South China Sea and the Senkaku Islands in the East China Sea, are causing concerns about stability in the region.