The International Monetary Fund (IMF) admitted China's yuan into its benchmark currency basket on Monday (30 November) in a win for Beijing's campaign for recognition as a global economic power.
The IMF's executive board agreed to add the yuan to its Special Drawing Rights (SDR) basket alongside the dollar, euro, pound sterling and yen, in a move earlier backed by IMF managing director Christine Lagarde and in-house experts. To meet the IMF's criteria, Beijing has undertaken a flurry of reforms in recent months, including better access for foreigners to Chinese currency markets, more frequent debt issuance and expanded yuan trading hours.
"The addition and the inclusion of the renminbi in the SDR basket of currencies is a recognition of the significant reforms which have been conducted, of the significant opening up of the Chinese economy, of the financial, more market-driven principles that are being used by the Chinese authorities going forward. That is clearly symbolic in a way of all those reforms, which is why I associated the renminbi inclusion with the reforms conducted and to be continued," Lagarde told journalists at a briefing at the IMF's Washington headquarters.
The yuan's inclusion is a largely symbolic move, with few immediate implications for financial markets. But it is the first time an additional currency has been added to the SDR basket and the biggest change in its composition for 35 years. The change should take effect in October 2016.