China loves the US dollar

China’s central bank has radically revised its view of US economic and strategic power, predicting that the dollar will remain the world’s paramount reserve currency for decades to come.

Jin Zhongxia, head of the central bank’s research institute, said America’s energy revolution and export revival had shaken up the global landscape and would lead to a stronger dollar over time. “The dollar’s global dominance will continue,” he said.

Dr Jin said the world was moving to a “1+4” system, with the greenback serving as the anchor of global payments, supplemented by “four smaller reserve currencies” – the euro, sterling, yen and yuan.

“Compared with the euro area, the dollar zone has much greater resilience to shocks. The debt crisis in the euro area has demonstrated the structural weakness of this currency,” he wrote in a paper for the February bulletin of the Official Monetary and Financial Institutions Forum.

The comments suggest a profound shift in thinking about the US since the financial crisis five years ago, when premier Wen Jiabao questioned if Chinese holdings of US Treasuries were “safe”, and the central bank issued a paper calling for a “global currency” run by the International Monetary Fund.

The prevailing view in Beijing was that America had been toppled as a great power and was crippled by debt.

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I sort of agree that it will be the worlds paramount but still remember the GBP is worth more and we are nothing like the size of the US