The decision, of course, on whether the RMB should be included in the SDR basket rests with the IMF’s Executive Board.
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While not a freely traded currency, the SDR is important as an global reserve asset, and because the IMF issues its crisis loans, crucial to struggling economies like Greece, valued in SDRs.
The recommendation paves the way for the Fund’s executive board, which has the final say, to place the yuan CNY=CFXS CNY= on a par with the US dollar.DXY, Japanese yen JPY=, British pound GBP= and euro EUR= at a meeting scheduled for November 30.
“I support the staff’s findings”, she said in a statement immediately welcomed by China’s central bank, which said it hoped the worldwide community would also back the yuan’s inclusion.
But until recently the yuan’s exchangeability on worldwide markets has been too tightly controlled by Beijing for it to fully qualify. The board rejected including the yuan following the last review, in 2010, concluding the currency didn’t meet the test of being “freely usable”.
China’s economic slowdown complicated Beijing’s efforts to widen the currency’s use to meet that requirement.
The IMF had given Chinese officials strong signals that the yuan was likely to win inclusion in the current review of the SDR, the fund’s unit of account, Chinese officials with direct knowledge of the matter said in October.
The board of the worldwide Monetary Fund is expected to discuss China’s application to join the SDR this month.
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“In the recent past, the global economy has managed to take large shocks in its stride, but we think its capacity to absorb them is being increasingly challenged”, International Monetary Fund chief economist Simon Johnson said.
