[Photo/IC]

SDR

On Nov 30, the International Monetary Fund (IMF) decided to include the Chinese yuan as the fifth currency in its Special Drawing Rights (SDR) basket, effective on Oct 1, 2016, making China the first developing country to join the group in the post-Bretton Woods era.

China is the world's second-largest economy after the United States, the largest trading nation (since 2013), and the yuan is the second-largest currency for fund-raising in trade. Many countries/regions have chosen the yuan as a reserve currency. The inclusion of the yuan into the SDR will enhance its internationalization, increase the representativeness and stability of the SDR, and lift the pressure of a strong dollar on US manufacturing industries. It is also a victory for China's campaign for recognition as a global economic power.

Efforts for the yuan to be added to the IMF basket have nudged China toward financial reform. This will have a profound impact on China's economy as well as on the world economy. The significance may be on a par with China's entry into the World Trade Organization in 2001.