China joins the ‘elite currency’ club

THE Chinese yuan was last night added to a basket of elite currencies, underlining the country’s emergence as a global economic superpower.

The International Monetary Fund said that the yuan would join the US dollar, the British pound, the euro and Japan’s yen in its exclusive club of reserve currencies.

The IMF’s managing director Christine Lagarde said it was ‘an important milestone in the integration of the Chinese economy into the global financial system’.

Reserve currencies are held by central banks and governments as a buffer against crises. Analysts said the elevation of the yuan, or renminbi as it is also known, is a victory for the communist government in Bei- jing and would boost the credibility of the currency.

Professor Kamel Mellahi, an expert on China at Warwick Business School, said: ‘China has lobbied extremely hard to get the yuan added.’

He called the move ‘a big achievement for the Chinese government’ and a vote of confidence in its economic and financial reforms.

It is thought the IMF decision was in part designed to encourage stronger reforms.

China is the world’s second biggest economy behind the US. Beijing will hope approval for the yuan can boost demand – and undermine the dominance of the dollar.

City Focus – Page 65