July 9 (Bloomberg) -- Leaders of developing nations challenged the hegemony of the U.S. dollar, balked at the industrial world’s strategy for fighting climate change and sought more clout in global markets and institutions.

Five countries with almost half the world’s population -- China, India, Brazil, Mexico and South Africa -- demanded a greater stake in the management of the global economy, signaling the drift in power away from the financially wracked West.

The confrontation in L’Aquila, Italy at the annual Group of Eight summit dramatized the ascendance of emerging nations --led by China -- as the worst economic calamity since World War II batters the U.S. and its European allies.

China is “better situated to deal with this crisis,” billionaire investor George Soros said in a Bloomberg Radio interview yesterday. “The Chinese in my opinion are going to gain in power and influence in a way that people currently don’t recognize.”

Leaders of the G-5 -- representing 3 billion people with gross domestic product of $7 trillion -- appeared as a united front for a fifth time at the summit of the G-8, the advanced world’s forum founded in 1975.

“What is happening here is simply the acknowledgment of a reality,” Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, said in a Bloomberg Television interview. “Be it the fight against poverty, climate change, trade -- whatever you want that is global in nature -- you need those large emerging economies.”

Climate Clash

The eight -- the U.S., Japan, Germany, Britain, France, Italy and Canada, along with Russia, a member since 1998 --unite 880 million people with combined GDP of $32 trillion.

The G-5 took aim at the advanced economies’ call for a 50 percent cut in greenhouse-gas emissions by 2050, saying the policy would suppress the economic growth needed to lift millions out of poverty. They demanded money and technology to help clean up the atmosphere.

“I’m not entirely sure that we expected to come here and have 8 to 10 years of disagreement wash away in a couple of days,” White House press secretary Robert Gibbs told reporters today. “Everybody understands this is going to take some time.”

The contrast was highlighted yesterday when the International Monetary Fund said developing countries are leading the way out of the economic morass spawned by the industrial world.

China’s Growth

Emerging economies led by China will expand 4.7 percent next year, the IMF said, up from an April prediction of 4 percent. The Washington-based lender forecast growth of 0.6 percent in the advanced economies, up from expectations of stagnation.

Data this week testified to China’s resilience, with new loans rising almost fivefold in June to 1.53 trillion yuan ($224 billion) and passenger-vehicle sales gaining 48 percent the same month, the biggest jump since February 2006.

In a statement late yesterday, the G-5 warned the industrial world against backsliding on aid commitments and sought “a new global governance,” including better representation in the IMF and United Nations.

After parallel summits yesterday in a region rebuilding from an earthquake in April, the G-8 and G-5 met today to work on a statement to at least paper over the diverging worldviews.

Central to their dispute is the status of the dollar, its role as the world’s dominant reserve currency under threat from the $2.3 trillion in debt run up by the U.S. since the start of 2008 to stem the financial crisis.

Treasury Holdings

The G-5 -- mainly China -- held around $1 trillion in U.S. Treasury debt in April, giving them leverage over decisions made in Washington.

Developing countries should wean themselves away from the dollar and use their own currencies in settling trade accounts, Brazilian President Luiz Inacio Lula da Silva said, according to Indian Foreign Secretary Shivshankar Menon.

As some emerging countries grumble about the dollar’s hegemony, today’s joint meeting affirmed the need for “a stable and well-functioning international monetary system,” according to their joint statement.

“The financial crisis has focused attention on the dollar’s structural weaknesses, but it’s not something that they’re going to change,” said Jane Foley, research director at Forex.com in London. “The dollar’s importance will reduce over time, but it’s not going to be something which will happen quickly.”

Chinese President Hu Jintao didn’t need to show up in L’Aquila to project his influence. The Chinese leader hustled back to Beijing before the summit started to deal with ethnic disturbances along China’s western border, leaving State Councilor Dai Bingguo as a representative.

“Hu’s absence ironically demonstrated China’s presence,” said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo.

To contact the reporter on this story: James G. Neuger in Rome at jneuger@bloomberg.net

Last Updated: July 9, 2009 08:45 EDT