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FT: What sort of a financial deal should Obama be seeking to strike when he travels to China next month?
GS: I think this would be time because you really need to bring China into the creation of a new world order, a financial world order. They are kind of reluctant members of the IMF. They play along, but they don’t make much of a contribution because it’s not their institution. Their share is not commensurate … their voting rights are not commensurate to their weight, so I think you need a new world order that China has to be part of the process of creating it and they have to buy in. They have to own it the same way as, let’s say, the United States owns the Washington consensus, the current order, and I think this would be a more stable one where you would have co-ordinated policies. I think the makings of it are already there because the G20, in agreeing to peer reviews, effectively is moving in that direction.
FT: Do you think it’s possible to persuade China to allow the renminbi to become stronger?
GS: I think that they would be … they’ve been advocating for it, so I would take them at their word and use this as a special drawing rights more often and make the renminbi, even though it’s not convertible, part of the SDR. In other words, it should be one of the currencies used in the special drawing right arrangement, and that will bring them in.
FT: And that’s possible even with the renminbi not being convertible?
GS: Yes. Yes. It has been considered before and I think the Brazilian real should also be part of it. I think that a number of currencies which constitute a basket can be and should be increased.
FT: And what about the American concern that aiding and abetting this move away from the dollar as the world’s reserve currency ultimately means a weakening of the US economy?