The IMF executive board, which represents the 118 members of the Fund, is seen as not likely to go against the staff of the Fund in its recommendation to add the yuan and countries such as Britain and France have pledged already to support the change.
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China would respect the board’s decision and continue to deepen economic reforms, the PBOC said.
The United States, the Fund’s biggest shareholder, has said it would back the yuan’s inclusion if it met the IMF’s criteria, a U.S. Treasury spokesperson said, adding: “We will review the IMF’s paper in that light”. “I will chair a meeting of the Board to consider the issue on November 30”.
China applied to join the elite group past year, igniting controversy from Beijing to Washington over the depth of reforms within the world’s second-largest economy.
Nonetheless, the People’s Bank of China said the International Monetary Fund statement was an acknowledgment of the progress China had made in reforms and opening up its economy.
SDR inclusion will also pave the way for foreign firms to sell bonds and shares in China, and persuade New York-based MSCI Inc.to include Chinese stocks in its indexes, said ANZ.
According to SCnow, China has always wanted the yuan to be included in the IMF’s basket of currencies.
While the IMF’s Executive Board has the final say in deciding whether the yuan joins the basket of reserve currencies, the matter is not yet certain.
“China needs to develop and demonstrate more “soft power” in order to persuade the world to hold its assets and its currency”, Jen wrote.
Lagarde cited numerous reforms that China has instituted over the past few months as the catalyst for this swift reversal of opinion on the Yuan’s inclusion occurring now rather than later, and has set in motion the potential for China to compete head on with the dollar’s long-standing reign as the only global reserve currency used as the primary medium for trade.
Another surprise to financial markets was a devaluation of the yuan in August, described as a shift toward a more market-driven exchange rate.
Macroeconomic and finance coordination deputy at Bappenas, Bobby Hamzar Rafinus, said the agreement on using the yuan and rupiah in the two countries’ trade had been secured under the Bilateral Currency Swap Arrangement (BCSA) on October 1, 2013.
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“The renminbi’s rising status as an worldwide currency will help to transform the current global monetary system into a more multi-polarized system”, Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd.in Hong Kong, wrote in a note last week.
