Zhou Xiaochuan, governor of China's central bank, has suggested creating a “super- sovereign reserve currency” to replace the dollar over the long run. He would sharply enhance the global role of special drawing rights, the international asset created by the International Monetary Fund in the late 1960s and just given an enormous boost by the decision of the Group of 20 to expand its issuance by $250bn (€189bn, ￡171bn). These are the first big proposals for international monetary reform from China or indeed any emerging market economy and deserve to be taken seriously for that reason alone.

Several other Asian countries, Brazil and Russia have expressed support for Mr Zhou's ideas. The US and several other governments, however, have been quick to reject them, reaffirming their confidence in the central global role of the dollar. They apparently fear that serious discussion of this issue could shake confidence in the dollar, driving down its value and prompting a sharp rise in the euro and other currencies. Such instability and consequent rise in global interest rates would severely complicate US, European and global recovery from the crisis.

But there is a more immediate threat to financial stability from the global role of the dollar that could be significantly reduced by pursuing a more limited proposal made by Mr Zhou. The risk is that China and perhaps other monetary authorities, together holding more than $5,000bn in dollar reserves, will lose confidence in the dollar owing to the prospects for huge and sustained budget deficits in the US. Premier Wen Jiabao recently expressed such concerns in a highly unusual public statement, asking for “guarantees” of China's dollar holdings that recall the British demand for a guarantee in 1971 that triggered the US decision to break the dollar's link to gold.