RMB’s in­clu­sion in SDR called sig­nif­i­cant

China Daily (USA) - - FRONT PAGE - By CHEN WEIHUA in Wash­ing­ton chen­wei­hua@chi­nadai­lyusa.com

The in­clu­sion of the Chi­nese cur­rency into the In­ter­na­tional Mone­tary Fund’s Spe­cial Draw­ing Rights (SDR) bas­ket will not only help China’s fi­nan­cial re­forms but the evo­lu­tion of the in­ter­na­tional fi­nan­cial sys­tem, ac­cord­ing to IMF of­fi­cials and think tank economists.

Zhang Tao, the new deputy manag­ing direc­tor of IMF, said in­clu­sion of the Chi­nese cur­rency, the ren­minbi (RMB), makes the com­po­si­tion of the SDR bas­ket more rep­re­sen­ta­tive of the cur­ren­cies be­ing traded in the world.

“The RMB’s in­clu­sion will make it more at­trac­tive as an in­ter­na­tional cur­rency, con­tribut­ing to greater risk di­ver­si­fi­ca­tion,” Zhang told a fo­rum on Chi­nese eco­nom­ics on Wed­nes­day at the Peterson In­sti­tute for In­ter­na­tional Eco­nom­ics in Wash­ing­ton.

Zhang as­sumed the cur­rent post on Aug 22, re­plac­ing Zhu Min, also from China.

A for­mer deputy gov­er­nor of the Peo­ple’s Bank of China, the cen­tral bank, Zhang said the in­clu­sion of the RMB will also strongly sup­port China’s con­tin­ued ef­forts to re­form its mone­tary, for­eign ex­change and fi­nan­cial sys­tems. “It will help fa­cil­i­tate the coun­try’s in­creased in­te­gra­tion in the global fi­nan­cial com­mu­nity,” he said.

He be­lieves the in­clu­sion will help con­sol­i­date the process of RMB in­ter­na­tion­al­iza­tion, adding that ex­pe­ri­ence shows that cur­rency in­ter­na­tion­al­iza­tion can en­cour­age the de­vel­op­ment of deeper and more liq­uid fi­nan­cial mar­kets. “It can de­liver more pre­dictable macroe­co­nomic out­comes, as­sist the de­vel­op­ment of strong and cred­i­ble in­sti­tu­tions, and se­cure the in­tegrity of the mar­kets,” he said.

Zhang noted that while th­ese will be not achieved overnight, they can be cru­cial for China’s con­tin­ued emer­gence as a source of eco­nomic growth and fi­nan­cial sta­bil­ity.

In Novem­ber 2015, the IMF Ex­ec­u­tive Board an­nounced its de­ci­sion to in­clude RMB into the SDR bas­ket, ef­fec­tive on Oct 1, 2016. The de­ci­sion makes the yuan a new mem­ber in a bas­ket of four other cur­ren­cies — the US dol­lar, Euro, Bri­tish pound and Ja­panese yen.

Fabrizio Sac­co­manni, a dis­tin­guished vis­it­ing fel­low at the Peterson In­sti­tute, de­scribed the in­clu­sion of RMB as an im­por­tant recog­ni­tion of China’s grow­ing role in the world econ­omy and in­ter­na­tional mone­tary sys­tem.

“It is an im­por­tant ges­ture by the in­ter­na­tional com­mu­nity in the process of

re­bal­anc­ing the dis­tri­bu­tion of power in in­ter­na­tional fi­nan­cial in­sti­tu­tions,” he said, adding that it has been pur­sued for some time.

The Ital­ian econ­o­mist, who had served as deputy gov­er­nor of the Bank of Italy and as Italy’s Min­is­ter of Econ­omy and Fi­nances from 2013-2014, also de­scribed the move as a com­mit­ment by China to con­tinue to move to­ward fi­nan­cial in­te­gra­tion and open­ing its cap­i­tal mar­kets.

Fred Berg­sten, se­nior fel­low and direc­tor emer­i­tus of the Peterson In­sti­tute, said the US should warmly wel­come the ac­ces­sion of RMB into the SDR bas­ket.

“This is a his­toric de­vel­op­ment. It’s a very im­por­tant part of China’s over­all rise as a global eco­nomic power, a re­flec­tion of China’s will­ing­ness to ac­cept in­creased re­spon­si­bil­i­ties as the leader of the in­ter­na­tional econ­omy and in­ter­na­tional mone­tary sys­tem. I think it’s wholly de­sir­able,” he said.

Berg­sten be­lieves it’s his­toric for another rea­son. It’s the first case in which a na­tional cur­rency is be­com­ing a global cur­rency very much at the be­hest and ini­tia­tive of the is­su­ing coun­try. He said that the US dol­lar, pound ster­ling, Ja­panese yen and euro all are cho­sen by the mar­kets, adding that some is­su­ing gov­ern­ments were even re­luc­tant to see their cur­rency play­ing much of an in­ter­na­tional role.

“So I think China is break­ing new ter­ri­tory here in ac­tively seek­ing var­i­ous re­spon­si­bil­i­ties in an or­derly and timely way in an in­ter­na­tional role for its cur­rency. I think it’s his­toric in that sense…” he said.

Berg­sten warned his Chi­nese coun­ter­parts in the au­di­ence to be ready for some unan­tic­i­pated con­se­quences. “Some­body might even start ma­nip­u­lat­ing your cur­rency one of th­ese days as you play the in­ter­na­tional role,” he said.

Berg­sten made an in­sti­tu­tional pro­posal for the cre­ation of an SDR Coun­cil, or SDR5. He said that peo­ple who worry about in­ter­na­tional gov­er­nance have thought for many years about how to form a new gov­ern­ing or­ga­ni­za­tion that in­cludes many ad­vanced coun­tries but also China. “They talk about ex­pand­ing the G7, but China does not like that. Some G7 don’t like that ei­ther,” he said.

“But this is a nat­u­ral op­por­tu­nity,” he said, adding that the coun­cil could be ei­ther in­side or out­side the IMF to work for the evo­lu­tion of the in­ter­na­tional mone­tary sys­tem. It’s a very im­por­tant part of China’s over­all rise as a global eco­nomic power.

Zhang Tao, deputy manag­ing direc­tor of IMF

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.