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Interview: RMB's upgrade to reserve currency "good news": ex-ambassador

Xinhua, December 27, 2015 Adjust font size:

The decision by the International Monetary Fund (IMF) to confer the reserve currency status on China's renminbi (RMB), "is good news," a former Chilean diplomat said.

"It's good news because it acknowledges the role that the Chinese economy plays in the world economy," former Chilean ambassador to China Fernando Reyes Matta said in a recent interview with Xinhua.

The IMF executive board in November approved the inclusion of the RMB in its Special Drawing Rights (SDR) basket as an international reserve currency.

Effective from Oct. 1, 2016, 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.

"It is an acknowledgment that (the inclusion of RMB in the SDR basket) rebalances the spheres of economic power in the world," said Reyes, who now is director of the Chilean-Chinese Institute of Culture and the Center of Latin American Studies on China.

The move implies "changes in the future," in which BRICS economies (Brazil, Russia, India, China and South Africa) "can, as a whole, exercise important pressure," he added.

Now that the strength of China's currency has been recognized, what should follow is "recognition of China's efforts to adapt its monetary policy to the movements of the market," Reyes said.

Latin America should be attentive to the challenges and opportunities the RMB's new status presents, especially with China being the region's second largest trading partner and third largest importer, Reyes said.

In Chile, for example, the system of currency swaps with China allows an importer in Santiago to pay a bank in Chilean pesos, while in China the supplier is paid in the RMB, he said.

"These are the first steps of a reality that we will see grow," said Reyes.

"The most important thing is to achieve a system where the generation of global monetary liquidity is a multilateral decision. For Latin America, everything that has to do with multilateralism is more beneficial," Reyes said. Endi