China reassures on dollar debate before G8

By Silvia Aloisi and Anna Willard

ROME/AIX-EN-PROVENCE, France (Reuters) - France and Russia on Sunday urged a debate about the world's reserve currencies, but China said the dollar would keep its pre-eminence for "many years to come."

Beijing, which has floated the idea of an alternative to the dollar as global reserve currency one day, wants the matter discussed at this week's G8 summit in Italy, officials say.

But in remarks that appeared intended to reassure Washington, Chinese Vice Foreign Minister He Yafei told reporters in Rome: "The U.S. dollar is still the most important and major reserve currency of the day, and we believe that that situation will continue for many years to come.

"You may have heard comments, opinions from academic circles about the idea of establishing a super sovereign currency. This is all, I believe, now a discussion among academics. It is not the position of the Chinese government."

China's central bank head launched the debate last March when he said the SDR, the International Monetary Fund's unit of account, might one day displace the dollar.

The debate is highly sensitive in financial markets, which are wary of risks to U.S. asset values. Bankers reckon China holds perhaps 70 percent of its $1.95 trillion (1.2 trillion pounds) in official currency reserves in the dollar.

Several emerging market countries have said they want to reconsider the dollar's role and see a more diversified international monetary system.

"The dollar system or the system based on the dollar and euro have shown that they are flawed. But I am a realist and I understand that today there is no alternative to the dollar or the European currency," Russian President Dmitry Medvedev said in an interview with Italian media.