One reason China is setting up its sovereign wealth fund now is that huge trade surpluses and a vast reserve of foreign exchange mean it simply has too much cash to absorb into its own economy, and capital controls keep it from investing in liquid assets like American T-bills.

FORBES: Tracking The Sovereign Funds

Now China has much of its foreign exchange in U.S. treasury bonds, part of a total reserve worth over a trillion dollars.

NPR: Chinese Cash Moves Could Roil Markets

Goldman's economists suggest that 61% of a properly diversified foreign-exchange reserve would be in dollars, with 32% in euros and 7% in yen.

ECONOMIST: The dollar

Further confirmation that the U.S. dollar is gradually losing its reserve status came today from an International Monetary Fund report on global holdings of foreign exchange reserves by central banks.

FORBES: Dollar's Share Of Global Reserves Continues To Slide, Reserve Status Questioned

But Dino Kos, a former chief of markets at the Federal Reserve Bank of New York who now works for Portales Partners, a research firm, notes that the yuan does not meet one of the most basic requirements of a reserve currency: other countries cannot use it to intervene in foreign-exchange markets because it is not freely convertible.

ECONOMIST: America��s debt crisis will be chronic, not acute

For the next 18 years, the Federal Reserve loosely followed a de facto price rule by targeting commodity prices including the price of gold and the foreign exchange value of the dollar.

FORBES: How to Stop the Spike In the Price of Gasoline