With more than two-thirds of China's $2,000bn (€1,500bn, ￡1,400bn) of reserves in dollar-denominated assets, the US and China are condemned to financial interdependence. Worries about dollar weakness are assumed to lie behind the call in a recent speech by Zhou Xiaochuan, governor of the People's Bank Of China, for reform of the international monetary system.

In proposing a super-sovereign reserve currency based on International Monetary Fund special drawing rights, he emphasised the importance of rule-based issuance and manageable supply “disconnected from economic conditions and sovereign interests of any single country”.

The speech was interpreted by US economist Paul Krugman as an admission that China had driven itself into a dollar trap. Its export-led growth model means when trade implodes, as at present, it is importing unemployment. At the same time the accumulation of reserves that results from maintaining an undervalued exchange rate leaves it vulnerable to a dollar collapse. And it cannot diversify away from the dollar without bringing that about.