The IMF will add the yuan to its basket of reserve currencies, an international stamp of approval of the progress China has made integrating into a global economic system dominated for decades by the U.S., Europe and Japan.
The International Monetary Fund’s executive board, which represents the fund’s 188 member nations, decided the yuan meets the standard of being “freely usable” and will join the dollar, euro, pound and yen in its Special Drawing Rights basket, the organization said Monday in a statement. Approval was expected after IMF Managing Director Christine Lagarde announced Nov. 13 that her staff recommended inclusion, a position she supported.
The addition will take effect Oct. 1, 2016, the IMF said. The fund didn’t specify a weighting in the initial statement; in a preliminary report in July, IMF staff estimated the yuan would have a weight of about 14 percent to 16 percent.
The IMF reviews the composition of the basket every five years. The fund rejected the yuan for inclusion during the last review, in 2010, saying the currency didn’t meet the necessary criteria.
source: Bloomberg
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