Chinese Renminbi to Be Included in IMF’s Special Drawing Right Basket

  • Renminbi becomes fifth currency making up SDR basket
  • Inclusion is an important milestone in China’s global financial integration
  • Decision reflects growing international use and trading of renminbi
  • This is the first time in over 15 years that the list of currencies comprising the SDR has been altered. The change was agreed by the IMF’s Executive Board following a regular review of the currencies which make up the SDR basket.

    "The Executive Board's decision to include the RMB in the SDR basket is an important milestone in the integration of the Chinese economy into the global financial system. It is also a recognition of the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems,” said the IMF’s Managing Director, Christine Lagarde.

    “The continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which, in turn will support the growth and stability of China and the global economy,” she added.

    SDR: an international reserve asset

    The SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves. Since 1999, when the euro replaced the Deutsche mark and French franc, its value has been based on a basket of four currencies: the U.S. dollar, the euro, the Japanese yen, and the British pound, that met the IMF’s inclusion criteria.

    The composition and valuation of the SDR is typically reviewed every five years to ensure it reflects the relative importance of currencies in the global trading and financial systems.

    The most recent review by the IMF’s Executive Board concluded that China and its currency met the two criteria for inclusion in the basket: that the issuing country is among the largest exporters in the world and that its currency is “freely usable.”

    A currency is determined to be freely usable when it is widely used to make payments for international transactions and widely traded in the principal exchange markets. The IMF Executive Board’s determination that the RMB is freely usable and its decision to include the RMB in the SDR basket both take effect on October 1, 2016.

    The review also acknowledged recent steps taken by the Chinese authorities to grant full access for official reserve managers and their agents to the onshore fixed-income and foreign exchange markets, as well as steps to enhance data disclosure.

    SDR weights

    The revised SDR basket will be...

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