According to Sky News report, yuan will have a 10.92 percent share in the International Monetary Fund currency basket, which was last recast in 2010 with 41.9 percent dollar, 37.4 percent euro, 11.3 percent sterling and 9.4 percent yen.
Advertisement
“Going forward, China will continue to deepen and accelerate economic reforms and financial opening up, and contribute to promoting world economic growth, safeguarding financial stability and improving global economic governance”, it said in a statement.
“It is also a recognition of the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems”, Ms Lagarde said.
The Yuan now joins the dollar, euro, yen and pound which are the only other elite trading currencies of the world.
Some analysts argue that including the yuan in the SDR basket will prompt central banks and private investors around the world to increase their yuan-denominated holdings.
The IMF said the yuan’s inclusion will make the SDR more diverse and representative of the global community.
That compares with over 43 per cent for the U.S. dollar, and almost 29 per cent for the euro, global transactions organisation SWIFT said in October.
“Next year, the government will stimulate domestic demand to support the economy and this will likely come from property and infrastructure as both are meaningful contributors to the economy”, Jing Ning, portfolio manager at Fidelity International said.
“We are ready for the inclusion”, said Yi Gang, deputy governor of the People’s Bank of China, the central bank, at a news briefing.
The IMF requires currencies included in the Special Drawing Rights to be “freely usable” and traded widely in foreign exchange markets.
“Based on the IMF’s technical assessment and recommendation, its Executive Board, which includes Canada, decided that the RMB met all existing criteria for inclusion in the SDR”, a spokesperson for the Department of Finance told iPolitics.
While the immediate benefits of the yuan’s SDR entry may be limited, economists have looked beyond the symbolic significance of the label to far-reaching implications for China’s economic and financial reforms.
The International Monetary Fund will begin using the yuan as a reserve currency.
Advertisement
In August, China surprised markets by repeatedly devaluing the yuan amid signs of a slowdown in the Chinese economy, adding to concerns China may control the yuan’s value to give its exports a competitive edge.
