China’s central bank has called for the creation of a new global currency as an alternative to the dollar, in the latest sign of that country’s growing assertiveness on the international stage. But would the idea even work? China has more than $1 trillion in U.S. Treasuries and other government securities, analysts estimate — and the country doesn’t keep all of that money in its own currency because that would cause inflation. Also, by buying assets in dollars, China keeps the yuan from strengthening too much against the U.S. currency — which would make its goods more expensive to American consumers and hurt Chinese exports. But as the U.S. government ramps up spending to stimulate the economy and assist the battered financial sector, Chinese officials are worried that inflation will result — and that would erode the value of their dollar holdings, economists said.
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