Former Chinese central bank advisor Yu Yongding on Thursday urged reform of international financial and monetary systems.

He said it was a "process" the world needs to start now. "One of the fundamental causes of why we are now facing a severe crisis is that the U.S. dollar, a national currency, now serves as the most important international reserve currency. This should be changed," Yu said in an interview with Xinhua at the U.N. headquarters in New York.

He said U.S. domestic policies have tremendous impact on other countries because of the dollar's status as a global reserve currency.

"For example, as part of its crisis management, the United States has adopted a very expansionary monetary and fiscal policy," Yu said, "What would be the consequences of this extremely expansionary monetary policy? When the economic situation turns around, will the Federal Reserve be able to withdraw liquidity in a timely fashion so that in the middle or long term there will be no inflation?"

He said another concern is that the U.S. economy is going to raise some 3.8 trillion U.S. dollars in debt in the next five years.

An increase in the U.S. national debt and balance sheet of the Federal Reserve has led to concerns in some quarters about the stability of the dollar as a store of value, he said.

Yu said questions remain whether there will be enough demand for U.S. Treasuries. "If there is not, what about the price of these Treasuries? What will be the interest rate in the United States? And will the possible high interest rate stall the recovery of the global economy?"

A senior researcher of the Chinese Academy of Social Sciences, Yu now serves as a member of the Commission of Experts of the President of the U.N. General Assembly on Reforms of the International Monetary and Financial System.

The commission called for reform of the global economic governance in a comprehensive report to the U.N. conference on the world financial and economic crisis and its impact on development, a three-day event which began on Wednesday.

"The current crisis provides an ideal opportunity for reform of the international financial and monetary systems," Yu said, "Before the financial crisis I don't think the United States would have liked to discuss this issue. But now it is on the table, we have to discuss it."

He said the commission has identified three issues with the current international monetary systems -- instability, inherent deflationary tendency and inequality.

"A global reserve system is a critical step in addressing these problems to ensure that when the global economy recovers, it moves into strong growth without setting the stage for another crisis in the future," he said.

Yu said reform is a process, not something that can be accomplished overnight. But he also stressed that fundamental reform of the international financial and monetary systems was "feasible" and called for global action to move toward it.

"I think we need to do it now, and we have a unique opportunity to carry out the reform," he said.

(Xinhua News Agency June 25, 2009)