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2nd LD: IMF approves inclusion of China's RMB in SDR basket

Xinhua, December 1, 2015 Adjust font size:

The International Monetary Fund (IMF)'s executive board on Monday approved the inclusion of China's currency renminbi (RMB) in its Special Drawing Rights (SDR) basket as an international reserve currency.

The IMF board, which represented the fund's 188 member countries, decided that the RMB "met all existing criteria," the IMF said in a statement after completing the regular five-yearly review of the SDR basket here.

The RMB will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the euro, the Japanese yen and the British pound, from Oct. 1, 2016, it said.

Christine Lagarde, managing director of the IMF, said, the board's decision is "an important milestone in the integration of the Chinese economy 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," 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."

The RMB will have a weighting of 10.92 percent in the new SDR basket, while the respective weighting of other currencies in the basket are 41.73 percent for the U.S. dollar, 30.93 percent for euro, 8.33 percent for the Japanese yen and 8.09 percent for the British pound, according to the IMF.

"Launching the new SDR basket on October 1, 2016 will provide sufficient lead time for the Fund, its members and other SDR users to adjust to these changes," the Washington-based international lender said.

The IMF reviews the currencies in the SDR basket every five years, and whether to add the RMB to the basket is a major issue for this year's assessment.

The SDR inclusion is an important part of China's ongoing financial reform.

To meet the IMF's criteria, Chinese authorities have undertaken a series of reforms in recent months, such as improving its foreign exchange rate formation system, opening up its interbank bond and forex markets, and improving data transparency by subscribing to the IMF's Special Data Dissemination Standard (SDDS).

In an article issued on "People's Daily" last week, Chinese central bank governor Zhou Xiaochuan committed himself to making the RMB fully convertible and freely usable within five years.

By then, Zhou said he expected more than a third of the world's international trade to be conducted through the RMB. Enditem