By Simon Rabinovitch
L'AQUILA, Italy, July 10 (Reuters) - Six years ago, China attended its first Group of Eight summit as a quiet observer on the sidelines. This week in Italy, it stirred the pot in a debate about the international financial system.
The Asian power's trajectory toward centre stage in such a short time and its willingness to broach difficult issues are emblematic of a growing diplomatic assertiveness, especially in the financial sphere.
The turnaround for the G8 has been equally abrupt. Inviting China and other developing countries in 2003 was seen at the time as a forward-looking, almost charitable act of inclusion.
The club of rich nations now frets that China is reluctant to fully engage with it, a sense of insecurity was piqued when Chinese President Hu Jintao hastily withdrew from the Italy summit because of domestic unrest.
An unusually assertive speech by the head of China's delegation on Thursday, however, showed that it meant business.
State Councillor Dai Bingguo indirectly questioned the dollar's dominance by calling for a better reserve currency issuance and monitoring system [ID:nPEK206735].
It was the first time a high-ranking Chinese leader had voiced such a demand in a formal speech, let alone in such a powerful multilateral forum. Previously, the idea had only been aired in relatively technical central bank reports.
China's willingness to inject reserve currencies into the discussion was all the more striking for the insistence of Japan, Britain and Canada that it was inappropriate to question the dollar's status at a time of global financial crisis.
"It is in some ways real concern about currency stability but at the same time it is China's response to the macroeconomic imbalance that keeps being raised by G8 members," said Gregory Chin, a Chinese foreign policy expert at York University in Toronto.
As in past years, the G8 nations called this week for an unwinding of global current account imbalances -- veiled criticism of China's massive trade surplus and, by extension, the tight grip it keeps on the yuan's exchange rate.
In beating the drum on reserve currencies, Beijing is returning fire at the United States, effectively deeming it unfit to be the anchor of the global economy.
"China is a rather moderate reformer," said Jin Canrong, international studies professor at People's University in Beijing. "It recognises that there is no way to expel the U.S. dollar at the moment, but it wants to gradually diversify the international financial system."
PUSHING BACK
Echoes of that willingness to push back, albeit cautiously, can be heard in China's drive to find alternatives to the G8.
Beijing was first invited to attend a G8 summit in 2003 for "informal dialogue". A major question for Chinese foreign policy makers was how close the country should get to the rich nations' group and how it could make its voice heard.
"Now, though, attending the G8 is not a very important question for China, because there are other forums where it can exercise its influence and which are better suited to its interests," said Wang Yong, international studies professor at Beijing University.
The two forums that China has seized on over the past year as alternatives are the G20 group of industrialised and developing economies and the BRIC gathering of the world's biggest emerging markets.
Chinese Vice Foreign Minister He Yafei, who leads the country's preparations for such international summits, was blunt before the meeting in Italy, saying that the G8 was "not representative enough" and that the G20 was better equipped to confront the financial crisis.
To be fair, the G8 has evolved to give China and four other developing countries a more permanent position within its architecture. But as the name of that wider grouping -- the G8 plus G5 -- suggests, the developing countries often feel more like adjuncts than equal partners.
The limits of China's enthusiasm were apparent in climate change talks when, along with India, it demurred on the goal of halving greenhouse gases by 2050. Part of Beijing's thinking was that the United Nations is the appropriate body for environmental negotiations, Chin said.
As for hammering out common positions among emerging markets, China has reason to prefer the BRIC forum where it meets with Brazil, Russia and India on their own initiative and time, rather than the G5 meeting conducted under the rich nations' gaze.
But do not write off the G8 entirely, said Andrew Cooper, associate director of the Centre for International Governance Innovation in Canada.
Once the emerging markets, led by China, coalesce into a more solid grouping, their natural interlocutor would be the G8.
"You could see these two caucuses trying to work out the pre-negotiation and pre-resolution of issues, and then coming together and having much more capacity to make decisions," Cooper said. (Reporting by Simon Rabinovitch; editing by Janet McBride)