RMB's inclusion in SDR called significant

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

chenweihua@chinadailyusa.com