China’s yuan will be added to an elite basket of global currencies used by the International Monetary Fund, in a boost to Beijing’s global economic ambitions.
Shareholders in the Washington-based IMF voted to include the yuan, also known as the renminbi, as the fifth member of its special drawing rights (SDR) currency basket alongside the dollar, the Japanese yen, sterling and the euro.
Christine Lagarde, head of the IMF, said on Monday that including the yuan in the basket was an important milestone in integrating China into the global financial system. “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. 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,” she said.
China had been lobbying for the IMF to add the yuan to its basket of currencies, which it uses to lend to sovereign borrowers. A vote by representatives of the IMF’s member countries to support the move marks a significant milestone for Beijing as it seeks to put the yuan on a par with the US dollar and play a growing role in global markets.
Analysts had widely expected the vote in favour of the yuan being added, after IMF staff recommended the move earlier this month. Lagarde endorsed that view, saying the yuan appeared to meet important criteria, including being deemed “a freely usable currency”.
The SDR basket is typically reviewed every five years by the IMF’s executive board to ensure it “reflects the relative importance of currencies in the global trading and financial systems”. The weightings are adjusted over time and new currencies can be added at those reviews. This decision means the yuan will the basket in October next year.
Concluding this latest review, the IMF said: “The inclusion of the renminbi will enhance the attractiveness of the SDR by diversifying the basket and making it more representative of the world’s major currencies.”
