As the G8 summit at L'Aquila in Italy nears, China and Russia have stepped up calls for a rethink of how global currency reserves are composed and managed, underlining a power shift to emerging markets from the developed nations that bred the financial crisis.

China will attend the summit this week as part of the G5 group of emerging nations which has been invited to meet with the G8. It also includes Brazil, India, Mexico and South Africa.

There should be a system to maintain the stability of the major reserve currencies, former Chinese Vice-Premier Zeng Peiyan said in Beijing yesterday.

A top Chinese diplomat said later as President Hu Jintao left for Italy that China would not directly raise its proposal for a new global currency to replace the dollar at the summit but was willing to discuss it.

Russian President Dmitry Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the dollar's future as a global reserve currency. Russia's proposals for the G20 summit in London in April included the creation of a supranational currency.

Medvedev aide Sergei Prikhodko told reporters in Moscow at the weekend that "we will resume" talks on the supranational currency proposal at the G8.

Indian officials also hinted they were interested in talking about the concept.

Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he was urging his Government to diversify its US$264.6 billion ($407.4 billion) foreign-exchange reserves and hold fewer dollars. "The major part of Indian reserves is in dollars - that is something that's a problem for us," said Tendulkar, chairman of the Prime Minister's Economic Advisory Council.

He said world currencies needed to adjust to help to unwind trade imbalances that had contributed to the global financial crisis.

For all the complaints about the dollar, emerging markets such as India remain dependent on the currency of the US, the world's largest economy and a US$2.5 trillion export market.

The International Monetary Fund said at the beginning of the month that the share of dollars in global foreign- exchange reserves increased to 65 per cent in the first three months of this year, the highest since 2007.

Tendulkar said the matter needed to be taken up in international talks and that it emphasised the need for those talks to go beyond the traditional G8.

THE G8 SUMMIT
Where: L'Aquila, Italy.
When: July 8-10.
Who: United States, Japan, Germany, Britain, France, Italy, Canada and Russia.
Agenda: An alternative to the US dollar as the global reserve currency looks set to be on the agenda when leaders of the world's eight biggest economies meet this week.

- BLOOMBERG, AGENCIES