China airs FX view but no big stir at G8 summit

By Brian Love - Analysis

ROME (Reuters) - China may have told world leaders it wants a better, more stable global reserve currency system, but analysts say Beijing is in no rush to dethrone the dollar because it has vast dollar-denominated assets.

The issue, aired during meetings of the G8 industrial powers and big emerging economies in L'Aquila, Italy, got no mention in official statements and leaders had no real discussion about it, according to Britain's Gordon Brown and several officials.

French President Nicolas Sarkozy took the chance, however, to say something that, on the face of it, looks broadly similar to China's line -- that the world economic order has changed and the monetary system should do likewise after decades where the dollar was sole point of reference internationally.

He has called in the past for fairer exchange rates, notably when European aircraft maker Airbus said euro strength is causing it serious problems. But little has ever come of it.

At L'Aquila there was little appetite for a debate many see more as evolution than revolution, a slow shift toward a system of other currencies sharing pride of place with the dollar.

"It is an old idea and always an interesting discussion," IMF chief Dominique Strauss-Kahn told Reuters.

The dollar lost a cent at one stage last week when Reuters reported that China wanted this debated in L'Aquila. But it did not react when a Chinese official aired Beijing's position.

State Councillor Dai Bingguo told the summit in Italy: "We should have a better system for reserve currency issuance and regulation, so that we can maintain relative stability of major reserve currencies' exchange rates and promote a diversified and rational international reserve currency system."

Britain's Gordon Brown said there was no serious discussion of the issue at meetings focused more on fighting recession.

"But of course it's a discussion that can take place about the long term but the suggestion that there is something that is going to happen in the next few weeks or months is just not realistic," said the British prime minister.

OLD FRENCH COMPLAINT

Sarkozy, who has in the past voiced frustration about euro strength making life harder for French exporters, was less coy.

"I hope in the coming months we will talk about currencies and the international monetary system," he said. "We have to ask ourselves: shouldn't a politically multi-polar world correspond to an economically multi-monetary world?"

When the dollar was sinking toward lows near $1.50 per euro in late 2007, Sarkozy vented his frustration on trips to the United States and China, and he has chided the European Central Bank for remaining aloof.

"The (Chinese) yuan is already everyone's problem. The dollar cannot remain solely the problem of others. If we're not careful, monetary disarray could morph into economic war. We would all be its victims," Sarkozy said on a U.S. trip in 2007.