The commonly used euro and sterling are expected to play a greater role as the Western economies recover their lost ground.

Meanwhile, as Asian economies gain clout globally, some far-sighted economists are raising the idea about a common currency unit that could ensure greater financial stability and economic coordination in the region.

The idea has tough hurdles to clear before it comes to fruition. Unlike Europe, Asian countries differ in size, development stage and political system. So chances are regional monetary integration will be based on a single national currency. Possible candidates include the Japanese yen, China's renminbi and even the Indian rupee.

However, the pattern of diversified financial systems is not without flaws since the Triffin Dilemma still exists. In other words, the issuing countries of reserve currencies cannot preserve the value of the reserve currencies while providing liquidity to the world.

The only viable solution is to create a super-sovereign reserve currency. This was initially proposed by British economist John Maynard Keynes in 1940. Earlier this year, governor of China's central bank Zhou Xiaochuan lent fresh credence to such a currency. Right before the London G20 Summit, Zhou publicly pushed for a new international reserve currency based on Special Drawing Rights, a kind of synthetic currency created by the IMF in the 1960s.

In another move, a reform panel of the United Nations recommended the world ditch the dollar as its reserve currency in favor of a hard-traded, weighted, shared basket of currencies.

China's role

As uncertainties hang over the world's financial system, China needs to reposition itself for a greater say in the international finance arena, and at the same time fend off risks.

The most daunting challenge is how to safeguard the value of its dollar assets since more than 60 percent of China's forex reserves of $2 trillion are parked in U.S. treasuries. In the wake of a gloomy prospect on the greenback, it is necessary for China to load off on the holdings. But any abrupt sell-off would send the dollar plunging, hurting its interests as much as America's.

A more prudent approach is to gradually diversify into other currencies or dollar assets that are well protected against inflation.

Internationalization of the renminbi is also part of the country's efforts. To propel greater use of the renminbi, China has kicked off a pilot program allowing companies in five domestic cities to settle cross-border trade transactions in the renminbi. In addition, the Ministry of Finance planned to float 6 billion yuan ($878 million) in renminbi sovereign bonds in Hong Kong on September 28.

In the interests of a more mature monetary system, China needs to allow broader international access to a freely tradable Chinese currency linked directly to functioning Chinese capital markets. Chinese financial institutions should also be allowed to issue renminbi-denominated securities in international markets.

Besides this, sparking outbound direct investments will also be an effective way to take pressure off the piling forex reserves and help home-grown companies become global players. The government still has a lot to do to pave its way out, including increasing its policy transparency and pushing forward reforms of state-owned enterprises, as well as clearing away protectionist restrictions.