Yuan: China meets ex­port cri­te­rion

China Daily (Canada) - - FRONT PAGE -

Ti­wari said RMB is the only cur­rency not cur­rently in the SDR bas­ket that meets the ex­port cri­te­rion. There­fore, a key fo­cus of the cur­rent re­view will be whether the RMB also meets the freely us­able cri­te­rion.

His­tor­i­cally, de­ci­sions that have changed the val­u­a­tion method have been made with a 70 per­cent ma­jor­ity.

The re­view is well un­der­way, ac­cord­ing to Ti­wari. Fur­ther work still needs to be done in a num­ber of ar­eas to help in­form the ex­ec­u­tive board’s de­ci­sion. Staff con­tin­ues its tech­ni­cal work, in­clud­ing on ad­dress­ing data gaps and op­er­a­tional is­sues while work­ing closely with Chi­nese author­i­ties and other mem­bers be­fore the for­mal board meet­ing.

Eswar Prasad, a pro­fes­sor of trade pol­icy at Cor­nell Univer­sity and a se­nior fel­low at the Brook­ings In­sti­tu­tion, said that the IMF’s re­view in­di­cates that China has made sig­nif­i­cant progress on meet­ing the “freely us­able” cri­te­rion for the RMB to be in­cluded in the SDR bas­ket, but that more progress is needed.

“The de­ci­sion about the RMB’s in­clu­sion in the bas­ket hinges on re­forms such as greater ex­change-rate flex­i­bil­ity, more in­vestor ac­cess to on­shore for­eign ex­change and se­cu­ri­ties mar­kets, and avail­abil­ity of a wider range of gov­ern­ment debt se­cu­ri­ties,” said Prasad, a for­mer IMF China Di­vi­sion chief.

He said IMF staff also has sig­naled that the RMB’s in­clu­sion in the SDR bas­ket will ul­ti­mately be a mat­ter of judg­ment by the IMF ex­ec­u­tive board be­cause the de­ci­sion falls right at the mar­gin.

“China clearly meets the ‘ex­port gate­way’ cri­te­rion, but the tra­jec­tory of China’s fi­nan­cial de­vel­op­ment and RMB’s in­ter­na­tional us­age, while ris­ing im­pres­sively, are not yet suf­fi­cient to meet the ‘freely us­able’ cri­te­rion,” Prasad told China Daily on Tues­day.

He said in­clu­sion of the RMB in the SDR bas­ket would give the cur­rency the IMF’s of­fi­cial im­pri­matur, fa­cil­i­tate its use as an in­ter­na­tional cur­rency and en­hance its ac­cep­tance as a re­serve cur­rency by for­eign cen­tral banks.

“This could be more im­por­tant for cen­tral banks than it is for mar­ket par­tic­i­pants who may be less con­cerned about the IMF’s of­fi­cial seal of ap­proval,” he said.

In a story pub­lished in the South China Morn­ing Post in June, Li-Gang Liu, chief economist for Greater China, ANZ Bank in Hong Kong, and a nonres­i­dent vis­it­ing fel­low at the Peter­son In­sti­tute for In­ter­na­tional Eco­nom­ics, ar­gued that the RMB has ob­tained the ba­sic qual­i­fi­ca­tions for in­clu­sion in the SDR bas­ket.

The RMB is now the sec­ond­largest global trade-fi­nanc­ing cur­rency,.

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