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If the G-20 Summit, which will be held on April 2 in London, agrees to this proposal, it will amount to allowing China to take over the International Monetary Fund, which is managing the SDRs.

The IMF created the SDRs in 1969 to support the Bretton Woods exchange-rate system that collapsed in 1971. The SDRs now act as a unit of account, reflecting contributions from members, rather than a currency. The value of SDRs are based on a basket including the dollar, the euro, the Japanese yen and the British pound, shielding them from swings in a single currency. One special drawing right is valued at about US$1.50 (Bt53).

If the US caves in, China's yuan will dominate the weighting in the basket of SDRs, rendering it de facto control over the new world reserve currency. China's proposal comes amid the wobbling US dollar, which is lurching into a debt crisis.

The US is suffering a geopolitical setback, as its financial system is a shambles. Confidence in the US dollar is running at a low ebb. Creditors and investors are shying away from holding dollar assets. When the maturities of dollar-denominated debts and bonds are due, creditors and investors just cash in rather than roll them over.

Since the US financial institutions - which issue the debt en masse - are cash-strapped, they have no choice but to turn to the US Federal Reserve for funding. The question is whether the Fed will print enough money in time to meet the US dollar debt obligations to avoid massive defaults. We are talking about debt obligations worth trillions and trillions of dollars in the US banks' off-balance sheets in the second half of this year. Big US banks are about to fail further. China reads the game perfectly well.

Publicly, China, which holds about $1 trillion in US dollar assets, may say that it will continue to support the US Treasuries. But with its aggressive move to replace the dollar with the SDRs as the world reserve currency, it must have already been unwinding its dollar assets. China must be feeling more comfortable holding oil wells, mines, agricultural land or other hard assets rather than the dollar assets, which could become worthless once hyperinflation strikes if the Fed accelerates the printing presses.

Of course, the US will resist China. It has enjoyed the dollar as the world's reserve currency, which allows it to print dollars at almost no cost because it does not need to have any reserves as backup. The US paper currency has become the anchor of the international financial system, under which a global, dollar-linked economic system has also been created.

With the negligible cost of issuing the dollar, the US has enjoyed almost a free lunch in the financing of its over-consumption and high standard of living, which do not correspond with its underlying productivity.

But this dollar system is now about to fall apart because of the collapse of the real estate and financial bubbles, which have placed the US monetary system in a state of shock. Any financial package to rebuild the US economy or the financial system is going to be dwarfed by this huge financial black hole, which has yet to be quantified because it is being pushed under the carpet.

Is the US in a position to resist the pressure from China at this hour? US Treasury Secretary Timothy Geithner sent the dollar tumbling with comments about China's ideas for overhauling the global monetary system. Yesterday, Geithner was asked at a Council on Foreign Relations event in New York about People's Bank of China Governor Zhou Xiaochuan's call for a new international reserve currency. He said he understood it as a plan "designed to increase the use of the IMF's special drawing rights. And we're actually quite open to that".

The dollar slid as much as 1.3 per cent against the euro within 10 minutes of news accounts of Geithner's remark. It recouped much of the loss about 15 minutes later, when Geithner then predicted no change in the US currency's role.

IMF managing director Dominique Strauss-Kahn said on Wednesday that talks on a new world reserve currency to replace the US dollar were "legitimate" and could take place "in the coming months".

But the world might not be able to wait that long. If the G-20 Summit fails to come up with a radical solution to save the global financial system - such as laying the foundation for a new monetary system, dealing with the global banks in a more decisive way and plugging any black hole in the banking system - then the world will turn into a no man's land. It's going to be the end of history.