NANJING, China, March 31 (Reuters) - The United States must slash its budget and trade deficits to help maintain the dollar's dominant role in the world economy, former Chinese central bank chief Dai Xianglong told Reuters on Thursday.
"The dollar is still the main global currency. But the United States must consider cutting its budget and trade deficits relative to GDP to the world average level to maintain the dollar's status," Dai said on the sidelines of a G20 seminar aimed at exploring ways of improving the global monetary order.
"The euro zone is able to achieve that goal. Why can't the United States?"
It was "obvious", Dai said, that the dollar's role in the global economy had been slipping.
The world needed a more diversified monetary system, while major economies should coordinate their exchange rate policies and step up supervision of global capital flows, he added.
Dai said the euro's global role should not be underestimated despite the debt woes of some euro zone countries. The debt crisis was caused not by the currency but by unfettered budget deficits in some small countries, he argued.
In the long run, the euro and a long-mooted Asian currency unit should be the mainstay of the global monetary system, Dai said.
"Because the Asian currency has yet to take shape, we should let the renminbi play a bigger role," said Dai, now the head of China's national pension fund.
The Chinese yuan is also known as the renminbi. (Reporting by Kevin Yao; Editing by Alan Wheatley and Don Durfee)