Introduction:

The main feature of the current international monetary system is that it is still a US dollar-centered reserve regime, though the Bretton Wood system has collapsed at the beginning of the 1970s. The reserve regime is not only unstable but also unequal. Basically, the dollar-centered reserve regime has three flaws. The first one is its inherent instability, which was correctly described as Triffin Dilemma by Robert Triffin in 1961, i.e. the issuing countries of reserve currencies cannot maintain the value of the reserve currency or the stability of its exchange rate while providing sufficient liquidity to the world. The financial history in the past four decades indicates that it has been very difficult to keep the US dollar stable as a main reserve currency. With the large current account deficits of the United States, the US dollar repeatedly suffered significant depreciation, particularly at the beginning of the 1970s, the middle of the 1980s and the period of 2002-2005. Almost in each period, large depreciations of the US dollar have been related to global financial turmoil and even economic recessions in the rest of the world.

The second one is that there is a conflict between the target of domestic macroeconomic stabilization of the reserve-currency issuing country and the global need for reserve currency supply (Zhou 2009).