Beijing has pushed for the yuan to join the basket as part of its long-term strategic goal of reducing dependence on the dollar and to mark the country’s coming of age as an economic power. The board rejected including the yuan following the last review, in 2010, concluding the currency didn’t meet the test of being “freely usable”.
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According to Radio Biafra, the executive board, which represents the Fund’s 188 members, is seen as unlikely to go against staff recommendation and countries including France and Britain have already pledged their support for the change.
WASHINGTON – worldwide Monetary Fund chief Christine Lagarde on Friday backed adding China’s yuan to the global lender’s benchmark currency basket after staff found it met the criteria for inclusion.
China has rolled out a flurry of reforms recently to liberalize its markets and also help the yuan meet the IMF’s checklist, including scrapping a ceiling on deposit rates, issuing three-month Treasury bills weekly and improving the transparency of Chinese data. The USA said it would support inclusion of the yuan if it demonstrates it meets the IMF’s technical criteria.
“The extension would also allow users sufficient lead time to adjust in the event that a decision were to be taken to add a new currency to the SDR basket”, the International Monetary Fund said at the time.
The yuan hit headlines in August when China’s central bank devalued the currency and said it would use a more market-oriented system to calculate the point around which the currency can trade each day. These restrictions, along with concerns that the yuan is set to come under steady depreciation pressure, may cause corporates to back off from holding yuan.
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China’s central bank, the People’s Bank of China, also issued a statement today on its website that welcomes the IMF’s announcement and appreciating the analysis of the International Monetary Fund staff on including the RMB into the SDR currency basket. “Going forward, China will continue to deepen economic reforms and promote financial opening up”. The decision, of course, on whether the RMB (yuan) should be included in the SDR basket rests with the IMF’s Executive Board.
