Beijing - Criticism from China rose Thursday against US monetary policy with economists saying Washington must do more to restore confidence in the dollar. The United States should "take real responsibility to clear up the mess it has created," Erh-Cheng Hwa, chief economist at the Bank of Communications and a former economist with the International Monetary Fund (IMF), told the official China Daily newspaper.
Hwa's remarks were published after US President Barack Obama expressed confidence Tuesday in the US currency and economy. Obama flatly rejected China's call to replace the dollar with a global reserve currency, an idea that has also been suggested by Russia, adding that the dollar "is extraordinarily strong right now."
"Despite all the talk of 'confidence,' investors are still deeply concerned about their holdings of the US dollar and Treasuries not only in China but around the world," Hwa said.
Chinese economists had also earlier criticized a US central bank plan to purchase 300 billion dollars in Treasuries and print more money. They called the move no sign of trust and warned that the growing US national deficit is weakening the dollar and driving inflation.
On Tuesday, China's central bank chief, Zhou Xiaochuan, proposed the dollar be replaced with a global currency reserve to settle international payments in the wake of the global financial crisis and recession.
"The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," Zhou said.
Hwa said he believed Zhou's proposal would add pressure on the United States for reform.
Wang Jianye, chief economist of the Export-Import Bank of China and another former IMF economist, agreed with Zhou that "the existing international monetary system is out-of-date."
"It does not reflect the profound changes in the world economy and hence is no longer workable," Wang told the China Daily.
The economist said mechanisms should be put in place to ensure that the United States takes into account the worldwide effects its monetary policy has.
China is the United States' largest creditor, holding 740 billion dollars in US government bonds, and is concerned about the value of those holdings.
