IMF to include Chinese renminbi in currency basket

1 Dec 15

The International Monetary Fund is to include the Chinese renminbi in the currency basket that determines the value of the body’s Special Drawing Rights reserve asset.

IMF managing director Christine Lagarde hailed the decision as an “important milestone” and said it recognised the integration of the Chinese economy into the global financial system and the progress made by China’s authorities in reforming monetary and financial systems.

She said: “The continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy.”

Special Drawing Right is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves with an asset that could be exchanged for freely usable currencies in order to smooth global trade.

They are allocated to IMF members based on each country’s quota in the fund and is currently based on a basket of four major currencies – the US dollar, the euro, Japanese yen, and UK pound sterling.

A total of 204.1 billion SDRs have been allocated to date, most recently in 2009 when SDR 182.6 billion was allocated. A single SDR is currently worth $1.38 (£0.91),

Inclusion of the renminbi from October 2016 reflects an IMF conclusion that it is a freely usable currency in global transactions.

 

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