In yet another sign of its growing prominence on the global financial stage, China called for a new world reserve currency to replace the dominant dollar.

An ABC news report said China is showing “growing assertiveness” on revamping the world economy:

The surprise proposal by Beijing’s central bank governor reflects unease about its vast holdings of U.S. government bonds and adds to Chinese pressure to overhaul a global financial system dominated by the dollar and Western governments.”

Gov. Zhou Xiaochuan recommended creating a currency controlled by the International Monetary Fund and made up of a basket of global currencies. Xiaochuan said the move would help “to achieve the objective of safeguarding global economic and financial stability.”

Although US and European economic officials brushed off the proposal, the boldness off the plan demonstrates growing Chinese clout.

As we reported earlier this week, a Chinese bank will soon join the London Bullion Market Association’s (LBMA) silver price-setting process. Earlier this month, the yuan passed the yen to become the fourth most-used currency for global payments. And it appears increasingly likely that the yuan will soon be included in the IMF’s Special Drawing Rights basket, currently comprised of the US dollar, euro, yen, and the British pound. As reported in the Economic Times of India:

China’s yuan ‘ticks all the right boxes’ for inclusion in the International Monetary Fund’s SDR list of global reserve currencies, the biggest international bank in China, HSBC, said in a report on Tuesday.”

China has been stockpiling gold as part of its strategy to raise the stature of the yuan on the world stage. After announcing its reserves for the first time since 2009 in July, the world’s largest consumer of gold has upped its holdings steadily. The Chinese gold stash increased another 1% in September.

A growing lack of faith in the US dollar may well underlie China’s proposal for a new reserve currency. As ABC reports:

The financial crisis has highlighted how America’s economic problems — and by extension the dollar — can wreak havoc on nations around the world. China is in a bind. To keep the value of its currency steady — some say undervalued — the Chinese government has to recycle its huge trade surpluses, and the biggest, most liquid option for investing them is U.S. government debt.”

Foreign central banks are selling US government bonds at the fastest rate on record.

As Peter Schiff has argued, it appears China is slowly working to untether itself from the dollar and allow its currency to float more freely:

The purpose and implications of this significant pivot has largely escaped the US media. In reality, the move raises the likelihood that the yuan will rise significantly when the dollar resumes its long-term bear market, not that it will remain weak forever.”