(Adds Russian government source)
* China says expects reserve currency issue to come up at G8
* Official says not heard that China asked for this debate
* He says dollar main reserve currency, wants stable dollar
By Simon Rabinovitch
BEIJING, July 2 (Reuters) - China hopes for diversification of the international currency system in the future and it would be "normal" for the issue to be raised at next week's Group of Eight summit, Vice Foreign Minister He Yafei said on Thursday.
But He, who is in charge of China's G8 preparation, told a news briefing he had not heard that Beijing had requested a discussion about reserve currencies at the meetings in Italy.
G8 sources told Reuters on Wednesday that China had asked for a debate on proposals for a new global reserve currency in Italy and the issue could be referred to briefly in the summit statement.
That news pushed the dollar down to three weeks low. It is particularly sensitive to comments from China because bankers estimate the country holds perhaps 70 percent of its $1.95 trillion in official currency reserves in the dollar.
"I have not heard that China has this request," He said in response to a reporter's question about the matter. "I have not heard of China raising this for discussion."
A Russian Finance Ministry source told Reuters on Thursday that Moscow had not seen any official requests from China regarding a debate on a global reserve currency.
"At the Finance Ministry level, at the level of financial sous-sherpas, at deputy ministers' level we have not received such information. We also have not heard anything like this from our colleagues at the Foreign Ministry," the source said.
The dollar ticked higher after the comments by He, who also said the dollar was the main global reserve currency and he hoped it would be stable.
But he flagged that Beijing expected the issue to come up at the three-day G8 meeting starting next Wednesday.
"This financial crisis has fully exposed some shortcomings in the international currency system," He said. "Of course we hope that in the future, the international currency system can diversify.
"I think this is an objective that the international community naturally wants to realise, and as I just said, if in the meetings some leader raises this issue for discussion, that would be normal."
China's central bank last week renewed its call for the creation of a super-sovereign reserve currency to reduce the dollar's global domination, which it said had worsened the financial crisis.
President Hu Jintao, who will be in Italy to attend the G8 summit, has yet to make any public statement about the idea for a new reserve currency.
The People's Bank of China caused a stir with its suggestion, first made in March, that the International Monetary Fund's Special Drawing Right (SDR) could eventually displace the dollar as the principal reserve currency.
The SDR is an international reserve asset allocated to IMF members and its exchange rate is determined by a basket of dollars, euros, sterling and yen.
WANTED: STABLE DOLLAR
"At present the U.S. dollar is the main reserve currency," He said. "We of course hope the exchange rate of the main reserve currency maintains stability."
Chinese officials have expressed concern that massive U.S. fiscal and monetary stimulus will generate inflation and drive down the dollar, handing Beijing big losses on its vast portfolio of U.S. bonds.
But these holdings also make China nervous about any tough talk that can drive down the value of the dollar, creating uncertainty about how aggressively it will press for debate on reforming the global currency system.
"We will see more diversification, but I don't think anything's going to happen quickly because it would almost be like shooting yourself in the foot," said Mitul Kotecha, global head of FX at Calyon in Hong Kong.
The SDR proposal has not just been idle talk from China. The IMF this week unveiled its long-awaited plan for issuing debt denominated in SDRs, and China has committed to purchase up to $50 billion of the notes, more than any other country.
Despite China's economic clout, its ability to press for changes in the global reserve currency system is circumscribed by the fact that its currency, the yuan, is not fully convertible on the capital account.
"When the SDRs are revised, China would gain little of a sympathetic hearing if it hasn't done further work to reform its FX system," Patrick Bennett, economist with Societe Generale, said in a note.
At the G8 summit, Vice Foreign Minister He said China's focus would be on the financial crisis, with the hope that countries will be able to harness their policies to help the global economy recover as soon as possible.
"The international crisis is still spreading," he said. "The outlook on whether the world economy can revive or when it will revive is still unclear."
He said China also wanted the summit to improve coordination between the Doha round of world trade talks and climate change negotiations. He said Beijing was worried that some countries might use global warming as a pretext for trade protectionism, imposing tariffs on exports linked to carbon emissions. (Additional reporting by Chris Buckley; Editing by Ken Wills and Neil Fullick)