China’s appeal for a new international currency to supplant the almighty dollar reminds me of the Victorian-era effort to make Esperanto the world’s universal language.

The idea was to harmonise communications across our polyglot planet. But Esperanto has never been officially recognised — although there briefly existed a Soviet Esperanto Association (until it was quashed by Stalin in 1937).

The governor of China’s central bank is calling for a “super-sovereign” currency to be created by the International Monetary Fund to replace the US greenback in foreign-cash reserves.

Usually, countries looking to beef up their foreign cash reserves look no further than the US dollar. China holds the world's biggest horde of greenbacks — nearly $2 trillion — almost half of which is invested in Treasury bonds.

China’s fear is that that particular cash pile could come back and bite its economy in the back. Basically, the Chinese are worried about their dollar hoard as the United States rolls out massive stimulus plans that are likely to result in a ballooning deficit.

The thinking is that a reserve currency would be more economically reliable and save China lots of pain in the event of the dollar taking a nosedive.

Now of course, it isn't a coincidence that China's bank governor is making his pitch on the eve of the G20 meeting on the financial crisis.


Yuan ambitions

China will be at that gathering — and it's clearly signalling that it would like to be heard loud and clear at the G20 table, now and in the future.

What China is not doing, for the moment, is calling for its own yuan to be that reserve currency. That is not say that it’s not doing a full-court press to promote the yuan. Bloomberg news reports that China has recently signed currency swaps with regional neighbours including Indonesia, South Korea, Hong Kong and Malaysia.

Who knows? Some say the yuan could one day be the Asian euro. But that's a way off. For now, China's calling for the IMF-managed super-currency, based on a basket of currencies.

The reaction to the idea in the United States has been tepid, to say the least.

Obama panned it. He told reporters he doesn't see the need for a global currency — sentiments shared by the Fed chief, Ben Bernanke, and Obama's Treasury secretary, Timothy Geithner.

They naturally chafe at the idea of some other upstart currency vying with the dollar for bragging rights to the world's biggest, baddest currency.

Meanwhile, at a recent financial forum sponsored by the Wall Street Journal, Paul Volcker, a former US Fed chief, said that it was disingenuous of the Chinese to complain about having too many dollars. No one forced them to buy the greenbacks, he insisted, noting that the Chinese also chose not to sell their dollars for fear of devaluing the yuan.

The bottom line is that China’s financial well-being, for now, is tightly intertwined with that of the dollar. So the Chinese are unlikely to do anything to seriously undermine the greenback’s value.