Beijing also seeks to have the yuan included in the IMF’s basket of special drawing rights (SDR) basket reserve currencies. The move also creates potential headaches for US President Barack Obama as he prepares to host Chinese President Xi Jinping at a summit in September.
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If the yuan is not included into the basket next year, China will have to wait another five years for the next review.
Last week, the People’s Bank of China moved to devalue the currency over the course of several days that it said was a bid to use a new method to calculate the central parity rate that is more responsive to market conditions.
“It’s unfortunate the equity bubble burst when it did and that we are on the cusp of a [US Federal Reserve] rate hike, which along with a weak China, is scaring investors away from emerging markets”, said Mr Peng.
Unlike the other currencies, the yuan does not trade freely.
The United States, which is the IMF’s largest shareholder, has not said if it will support the yuan’s inclusion.
“The nine-month extension is intended to facilitate the continued smooth functioning of SDR-related operations and responds to feedback from SDR users on the desirability of avoiding changes in the basket at the end of the calendar year”, the IMF stated Aug. 19.
The report said freezing the current basket, which is due to expire on Dec 31, will give parties more lead time to adjust to any changes.
As the yuan’s fall broke a rally in the Standard & Poor’s 500 Index and prompted a commodities selloff, some US politicians were quick to label China a currency manipulator and raise fears of a new foreign-exchange war.
UBS economist Tao Wang is forecasting China’s economy will grow 6.8 per cent this year.
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The decision announced in a statement on Wednesday, however, would defer the implementation of any move to include the yuan. “You need to go through some cycles, and get at least months, if not years of data to show China is allowing its currency to fluctuate through economic cycles”.
