China welcomes IMF green light to yuan
China welcomes support from the IMF to include the yuan in the elite basket of reserve currencies possibly at the end of this month.
On Friday, IMF chief Christine Lagarde said the International Monetary Fund now thinks the yuan meets the requirements to be a “freely usable currency”.
The remarks are seen as the clearest sign that the yuan may be admitted to the basket of special drawing rights (SDR) currencies when the IMF Executive Board meets on Nov. 30.
The decision would mark a milestone in China’s bid to establish itself as a global economic powerhouse.
China has pressed for the inclusion of its currency, also known as the renminbi, in the basket as it would confer de facto reserve status on the yuan. The basket currently consists of the dollar, the euro, the UK pound and the yen.
The People's Bank of China (PBoC) said the new inclusion “will have win-win benefits both for China and the world".
"China thinks that the inclusion of the RMB into the SDR basket will strengthen the representativeness and the attraction of the SDR and that it will improve the existing international monetary system," the bank said.
If the IMF decides to admit the yuan into the basket, the actual inclusion could take place as late as September 30.
China is the world’s second largest economy and leading trading nation, with its currency growing rapidly in importance in recent years.
It has emerged as the bellwether of the world’s economic health and its market developments are having far-reaching effects.
In August, China’s devaluation of the yuan sent global markets into a tailspin, prompting an outcry by the West which accused Beijing of waging a currency war through direct intervention in the market.
Washington is wary of Beijing’s growing financial clout and the serious challenge which the dollar faces as some of the emerging economies are switching to their local currencies in trade.
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