More work needed be­fore Chi­nese cur­rency is put in SDR bas­ket: IMF

The China Post - - WORLD BUSINESS -

The In­ter­na­tional Mon­e­tary Fund (IMF) said Tues­day that it needs to do “sig­nif­i­cant work” in re­view­ing the in­clu­sion of China’s cur­rency in its bas­ket of “spe­cial draw­ing rights” (SDR) re­serve cur­rency.

The main­land Chi­nese author­i­ties are seek­ing to ex­pand use of the yuan, also known as the ren­minbi ( RMB), by hav­ing it in­cluded in the SDR, an in­ter­na­tional re­serve as­set that cur­rently is com­prised by four cur­ren­cies: the dol­lar, euro, pound and yen.

The IMF ex­ec­u­tive board, which rep­re­sents the in­sti­tu­tion’s 188 mem­ber na­tions, will make its fi­nal de­ci­sion in Novem­ber, a se­nior IMF of­fi­cial said, speak­ing on con­di­tion of anonymity.

“The RMB’s in­ter­na­tional use has been in­creas­ing, al­beit from a low base, since the last SDR val­u­a­tion re­view,” the IMF said in a re­port.

Ac­cord­ing to the IMF, the yuan meets the cri­te­ria of be­ing a cur­rency used for widescale ex­ports of goods and ser­vices. But other con­di­tions re­main to be ex­am­ined.

“A key fo­cus of the re­view will be the de­ter­mi­na­tion on whether the RMB is a freely us­able cur­rency,” the IMF said.

In the IMF view, a freely us­able cur­rency is de­ter­mined by “the ac­tual in­ter­na­tional use and trad­ing of cur­ren­cies,” not whether a cur­rency is ei­ther freely float­ing or fully con­vert­ible.

The yuan is tightly con­trolled by the Chi­nese gov­ern­ment, a thorn in the side of China’s re­la­tions with the United States, the IMF’s largest share­holder. The U.S. gov­ern­ment has long ac­cused China of keep­ing the yuan un­der­val­ued to boost its ex­ports.

“Sig­nif­i­cant work re­mains out­stand­ing to in­form the Board’s de­ter­mi­na­tion with re­gard to the RMB’s in­clu­sion in the SDR bas­ket,” the IMF re­port said.

In late May, the IMF said that it did not con­sider the yuan un­der­val­ued, and the Group of Seven eco­nomic pow­ers said they unan­i­mously agreed that the yuan should be in­cluded in the SDR bas­ket, but the process should not be rushed.

The last time the SDR bas­ket was mod­i­fied was in 2000, when the euro re­placed France’s franc and Ger­many’s deutschemark.

What­ever the out­come on the yuan de­ci­sion, the IMF re­port pro­posed that the cur­rent SDR bas­ket re­main in force un­til Sept. 30, 2016, and not ex­pire as planned at the end of this year, to al­low more time for SDR users to adapt to the new bas­ket.

The IMF ex­ec­u­tive board is ex­pected to de­cide on that ex­ten­sion in Au­gust.

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