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BEIJING, June 26 (Reuters) - China renewed its call on Friday for the creation of a super-sovereign currency to reduce the dollar's domination of the world's monetary system.
In its annual financial stability report, China's central bank did not mention the dollar by name but said it was a serious defect that one currency should tower over all others.
"An international monetary system dominated by a single sovereign currency has intensified the concentration of risk and the spread of the crisis," the People's Bank of China said.
In a veiled call for the United States not to erode the value of the dollar through excessively loose monetary and fiscal policies, the PBOC urged closer supervision of those countries that issue the main reserve currencies.
The report dusted off a call by the bank's governor, Zhou Xiaochuan, for the creation of a super-sovereign currency.
In an essay in late March, Zhou caused a stir by suggesting that the Special Drawing Right, the International Monetary Fund's unit of account, could eventually displace the dollar as the principal reserve currency.
Friday's report not only advocated a full role for the SDR but said the IMF should be entrusted with managing a portion of its member countries' foreign currency reserves.
"To avoid intrinsic shortcomings in using a sovereign currency as a reserve currency, we need to create an international reserve currency that is divorced from sovereign states and can maintain a stable value over the long term," the report said.
Chinese officials have expressed growing concern in recent months that the big U.S. fiscal and monetary stimulus will generate inflation, handing Beijing big losses on its large portfolio of dollar-denominated bonds.
"When a national currency becomes the global price-setting currency for primary products, the trade settlement currency and the reserve currency, that national currency has great difficulty attending to both domestic monetary policy goals and the reserve currency needs of various countries.
"And the economic development model of debt-based consumption is most difficult to sustain," the PBOC said.
Turning to the domestic economy, the report said the slump in global trade would spawn risks for China's banks as exporters ran into difficulties. (Reporting by Zhou Xin, Aileen Wang and Chris Buckley; Editing by Alan Wheatley & Jan Dahinten)