The head of the International Monetary Fund says she supports adding China to an exclusive club of the world’s top currencies.
Christine Lagarde said that she supports findings by staff at the IMF that China’s currency, the yuan, meets the criteria for inclusion in the basket of currencies used in the fund’s operations, Reuters reported.
China has wanted to join the club known as the IMF’s Special Drawing Rights basket. It’s a virtual currency the IMF can use for emergency loans and IMF member countries can use to bolster their own reserves in times of crisis.
Joining the basket would give the yuan the IMF’s seal of approval and might encourage foreigners to use the Chinese currency more and to have more confidence in China’s financial markets.
The yuan would join the US dollar, euro, British pound and Japanese yen. Unlike those currencies, the tightly managed yuan does not trade freely.
Earlier this month, however, China announced it will allow the yuan to trade freely by 2020, potentially easing trade tensions with the United States and other nations.
The recommendation now will go before a vote by the IMF board on Nov. 30.
Welcomed by PBOC
China’s central bank said on Saturday it welcomed IMF’s backing adding China’s yuan, or renminbi, to the global lender’s benchmark currency basket after staff found it met the criteria for inclusion.
In a statement on its website, the People’s Bank of China (PBOC) said:
“The People’s Bank of China welcomes the statement of Christine Lagarde, and appreciates the analysis and suggestions of the IMF staff on including the RMB into the SDR currency basket, which is ... an acknowledgement of the progress in China’s recent economic development, reform and opening up.
“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.”
