SINGAPORE - Fears that quantitative easing by the United States will lead to a surge in capital flows to emerging markets have been overblown, World Bank President Robert Zoellick said Wednesday. 'Some of the concerns have been overstated,' Zoellick said in a Bloomberg Television interview in Singapore. 'Even if you didn't have quantitative easing, as long as you have differential growth rates you're going to see capital flow to these emerging markets.' The Federal Reserve last week announced plans to buy $600 billion of long-term government bonds in its second effort at so-called quantitative easing, or QE2, aiming to stoke U.S. economic growth. Policy makers from Asia to South America responded by warning it could depress the dollar and spark capital flight to emerging markets. While the Fed's move has 'made the debate tenser,' it's unlikely to create a flood of additional funds internationally, Zoellick said. These tensions can lead to 'a downward spiral of protectionism,' he said. 'Part of the problem in the system is because the Chinese currency is pegged, it's hard for others to adjust if China doesn't adjust,' Zoellick said. 'In the broader issue of exchange rates, you're moving to what I call a Bretton Woods III system, where you have key roles for the dollar, the euro, the yen, the pound, and over time, the renminbi,' he said. The Chinese currency 'has to internationalize and then become an open capital account.' Zoellick said in a column in the Financial Times earlier this week that Group of 20 nations should consider using gold as an international reference point of market expectations about inflation, deflation and future currency values as they reform the global monetary system. 'Gold is the yellow elephant in the room,' Zoellick said Wednesday. 'Markets are already using gold as an alternative monetary asset because confidence is low. Policy makers need to consider this as an indicator about how markets are viewing their policies.' Zoellick said his call for the use of gold as a reference point is not one that advocates a return to the gold standard. After his Financial Times column, Reuters said Zoellick was suggesting the adoption of a 'modified gold standard' while Agence France-Presse described it as a call on G-20 nations to bring gold back 'as an anchor to guide currency movements.' 'I don't believe you can return to a fixed exchange rate system and therefore I don't believe you can return to the gold standard,' Zoellick told reporters in Singapore today. 'There's uncertainty about the future of the international monetary system. That's not saying there should be a gold standard. It is saying that we have a problem that needs to be fixed.' Over time, countries need to be able to have flexible exchange rates, the former U.S. deputy secretary of state and chief trade representative said in the interview. 'You need to be able to try to avoid interventions except for extreme circumstances,' he said. Some of the emerging markets may have some hot capital- flow issues to deal with, and global finance chiefs and central bankers need to agree to some 'sort of norms of what are the appropriate roles, and then have the International Monetary Fund partly be the referee that observes those norms and as necessary blows the whistle,' he said. The global recovery has been 'rather slow and still fraught with uncertainties,' Zoellick said. Asia needs to spur private investment in infrastructure and increase the efficiency of government spending on such projects to support growth, he said in a speech in Singapore today. --With assistance from Anand Menon in Singapore. 