Russia Challenges Dollar, China Offers Loans
Russia also gave a prominent platform to Iranian President Mahmoud Ahmadinejad amid massive protests in Iran over his bitterly disputed re-election and questions in the West about the vote.
Chinese leader Hu Jintao said China will extend a $10 billion loan to a regional group that also includes Russia and four Central Asian states.
The move adds muscle to China's role in the Shanghai Cooperation Organization, a six-nation group Russia and China use to counter the Western influence in resource-rich, strategically placed Central Asia. The other members of the organization Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.
The leaders of Afghanistan, Iran, India and Pakistan were also at the table, underscoring Russia and China's reach for regional clout and global influence.
Hu said the loan is intended to shore up the struggling economies of its members amid the global financial crisis.
Meanwhile, President Dmitry Medvedev pushed his call for new global reserve currencies to complement the dollar at the summit.
"No currency system can be successful if we have financial instruments denominated in just one currency," Medvedev said. "We must strengthen the international financial system not only by making the dollar strong, but also by creating other reserve currencies."
After wrapping up the two-day Shanghai Cooperation Organization meetings, Medvedev was to host later Tuesday the first full-fledged summit of emerging economies Brazil, Russia, India and China, collectively called BRIC.
Medvedev's economic adviser Arkady Dvorkovich said Russia may put part of its currency reserves in bonds issued by Brazil, China and India. He told a briefing that Russia could make the move if the other three BRIC members reciprocate as part of efforts to diversify financial instruments.
Dvorkovich also proposed revising the way the International Monetary Fund's obligations are valued. He said the ruble, the yuan and gold should be part of a revised basket of currencies to form the valuation of the IMF's special drawing rights, or SDRs.
Dvorkovich denied any rift on the global currency issue with Russian Finance Minister Alexei Kudrin, who this week helped the dollar rebound in global markets by saying over the weekend that the dollar's status as the world's main reserve currency wasn't likely to change soon.
Dvorkovich said that the emergence of new reserve currencies would be a gradual process reflecting shifts in the global economy. "It can't happen fast, new reserve currencies emerge as economies of the countries issuing them gain strength," he said.
"Least of all now we need shocks at the currency markets," he said. "Any additional shocks are bad during the crisis. No one wants to bring the dollar down."
He added, however, that the creation of new reserve currencies should help distribute global wealth more fairly and also encourage economic leaders to pursue a more balanced economic policy.
The talk about the new global currency has been prompted by concerns in China and Russia that soaring U.S. budget deficits could spur inflation and weaken the dollar, debasing the value of their holdings.
"If we have more reserve currencies, we will be able to insist and even demand a more responsible approach by countries which issued the global currencies," Dvorkovich said. "Those who issue reserve currencies today don't always take the interests of the global economy into account."
Officials from Russia, China and Brazil have said in recent weeks that they would invest in bonds issued by the International Monetary Fund to diversify their dollar-heavy currency reserves.
China is Washington's biggest foreign creditor, holding an estimated $1 trillion in U.S. government debt.
The Treasury Department on Monday said that foreigners, including China and Japan, the two biggest buyers of U.S. government debt, cut their Treasury holdings in April.
Russia's Deputy Foreign Minister Sergei Ryabkov said that the BRIC summit was "not an attempt to compete with anyone."
While BRIC members share a desire to play a bigger role in creating a new global financial order and counterbalancing the West and Japan, their often contradictory interests would make forging a common policy a difficult task.
China and India have sizable labor resources, while Russia and Brazil are rich in natural resources. China is a major consumer of natural resources, unlike Russia and Brazil, which are top producers. While China wants lower oil prices, Russia and Brazil would seek higher oil prices.
Chinese leader Hu Jintao says China will extend a $10 billion loan to a regional group that also includes Russia and four Central Asian states.
The move adds muscle to China's role in the Shanghai Cooperation Organization, which it dominates along with Russia.
Hu spoke at a summit of the grouping in Russia. He said the loan is intended to shore up the struggling economies of its members amid the global financial crisis.
The Shanghai group includes impoverished Tajikistan. Kyrgyzstan, which borders China, also is poor and has few lucrative resources.