On the eve of his visit to the US, Chinese leader Hu Jintao has basically called for the replacement of the US dollar by the Chinese Yuan as the reserve currency, at least initially for China. He also sharply criticized the Fed’s quantitative easing policy. I discussed both topics last week.

When this is coupled with China’s test flight of its new stealth fighter while US Defense Secretary Robert Gates was visiting them, these are indications by China of its intention to challenge the US as the world’s leading power.