Federal Reserve Bank of Dallas President Richard Fisher said U.S. lawmakers must bring federal spending more in line with revenue as the Chinese yuan one day may rival the dollar’s dominant role.

“We face a very real risk of having formidable competitors to the dollar in the sweepstakes for sovereign investment,” Fisher said in remarks prepared for a speech in La Jolla, California. “As Chinese policy makers lay the groundwork for the continued internationalization of the renminbi, our nation’s fiscal authorities must bear in mind that there may one day be viable alternatives to the dollar and U.S. Treasury debt.”

China announced loosened control on banks’ lending and deposit rates starting tomorrow in a move UBS AG called a “milestone.” The decision coincided with the country’s first interest-rate cut since 2008 to counter the global economic slowdown.

“The most pressing challenge confronting China is reforming its domestic financial sector by permitting competition from the private sector and allowing the market to determine asset prices such as interest rates,” Fisher said at a forum held by the University of California, San Diego.

Fisher didn’t discuss the U.S. economy or monetary policy in his speech. He is not a voting member of the policy- setting Federal Open Market Committee this year.