The Obama administration took a step toward backing China’s bid to have the yuan recognized as a global reserve currency, as the US softened its insistence that the Chinese implement financial reforms to win support.
The International Monetary Fund is reviewing whether the yuan should be included in its Special Drawing Rights, a basket of reserve currencies used by the lender as a unit of account. After US President Barack Obama and Chinese President Xi Jinping met Friday in Washington, the two sides issued a statement saying the US supports the inclusion of the yuan “provided the currency meets the IMF’s existing criteria in its SDR review,” a point Xi highlighted in his press conference with Obama at the White House Rose Garden, Bloomberg reported.
The shift in the US position follows the administration’s failed attempt to prevent allies from joining the China-led Asian Infrastructure Investment Bank earlier this year, a strategy that was faulted by former policy makers including ex-Treasury Secretary Henry Paulson.
In June, a joint statement by the two countries said the US “supports China making the reforms that would lead to the inclusion” of the yuan in the basket. Friday’s statement mentions US support for “China’s commitment to implement further financial and capital market reforms.” The new language clarified to the Chinese that the IMF’s assessment of whether the yuan meets the fund’s SDR criteria will be the determining factor for American support, said an administration official who asked not to be identified.
Winning the IMF’s endorsement would validate efforts by Xi to push through policies aimed at making the world’s second-biggest economy more market-oriented, boosting China’s prestige as it prepares to host Group of 20 gatherings next year. At least $1 trillion of global reserves will convert to Chinese assets if the yuan joins the IMF’s reserve basket, according to Standard Chartered Plc and AXA Investment Managers.
Obama for his part said that he and China's president have agreed to stop engaging in cyber espionage. Obama, who said cyberattacks from China has stopped, suggested that if they persist, the US is willing to impose sanctions and other punishments required by law against the perpetrators. He added that the sanctions would be against individuals, state-run companies or big businesses.
However, the Chinese government has consistently denied the allegations. China claims to be a victim of cyberattacks and has cautioned the US to desist from making unfounded accusations.
Xi Downplays Differences
Downplaying their differences over the disputed South China Sea and the cyber espionage claims, Xi described his talks with Obama as "fruitful" and said it sent a positive signal on the synergy between the two largest economies.
Addressing a luncheon hosted by US Vice President Joe Biden and Secretary of State John Kerry at State Department, Xi said he and Obama were determined to build a new model of major-country relationship.
The visit, guided by consensus, achieved fruitful results with new, important progress in areas such as investment, people-to-people exchanges, climate change and coordination and cooperation in multilateral affairs, Xi said as he wound up his maiden visit to Washington.
"I believe that as long as our two sides join hands and make unremitting efforts, we will continue to open up new phases for China-US ties and better benefit peoples of the two countries and the world as a whole," he was quoted as saying by state-run Xinhua news agency.
Playing down the differences over the disputed South China Sea and the increasing cyber-attacks, Xi said the China-US ties have moved forward in general over the past 70 years despite twists and turns, bringing a lot of benefits for people of the two countries and the world.
The US has accused China of serial cyber thefts, and protested its military build-up in the South China Sea.
Xi said China and the US fought fascist invasion during the second World War, shoulder-to-shoulder, and safeguarded peace, freedom and justice. The Chinese people would never forget the assistance provided by the Americans, he added.
Both the governments would not engage in, or knowingly support online theft of intellectual property and explore the formulation of appropriate norms of behavior in cyber-space, the Chinese president said.
