China's RMB closer to IMF's SDR basket

An employee counts yuan banknotes at a bank in Huaibei, Anhui province.[Photo/Agencies]

The International Monetary Fund (IMF) will hold a board meeting on Nov 30 to consider whether the RMB should be included in the Special Drawing Rights basket.

The IMF Managing Director Christine Lagarde said that the staff of the IMF has issued a paper on Friday to the Executive Board on the quinquennial review of the SDR.

China's central bank, the People's Bank of China, also issued a statement today on its website that welcomes the IMF's announcement and appreciating the analysis of the IMF staff on including the RMB into the SDR currency basket.

The PBOC statement adds,"The inclusion of the RMB in the SDR basket would increase the representativeness and attractiveness of the SDR, and help improve the current international monetary system, which would benefit both China and the rest of the world.

"We hope the RMB's inclusion in the SDR basket will be supported by the international community. We look forward to the scheduled Executive Board discussion on November 30 and will respect its decision. Going forward, China will continue to deepen economic reforms and promote financial opening up."

According to the IMF, a key focus for the Board review is whether the RMB, which continues to meet the export criterion for inclusion in the SDR basket, also meets the other existing criterion, that the currency be "freely usable", which is defined as being "widely used" for international transactions and "widely traded" in the principal foreign exchange markets.

Lagarde said,"in the paper, the IMF staff assessed that the RMB meets the requirements to be a 'freely usable' currency and, accordingly, the staff proposes that the Executive Board determine the RMB to be freely usable and include it in the SDR basket as a fifth currency, along with the British pound, euro, Japanese yen, and the US dollar.

"The staff also finds that Chinese authorities have addressed all remaining operational issues identified in an initial staff analysis submitted to the Executive Board in July.

"I support the staff's findings. The decision, of course, on whether the RMB should be included in the SDR basket rests with the IMF's Executive Board."