Yuan joins club of IMF reserve currencies
Chinas yuan joined the International Monetary Funds (IMF) basket of reserve currencies yesterday in a milestone for the governments campaign for recognition as a global economic power.
The yuan joins the US dollar, the euro, the yen and British pound in the IMFs special drawing rights (SDR) basket, which determines currencies that countries can receive as part of IMF loans. It marks the first time a new currency has been added since the euro was launched in 1999. The IMF is adding the yuan, also known as the renminbi, or peoples money, on the same day that the Communist Party celebrates the founding of the Peoples Republic of China in 1949.
The inclusion into the SDR is a milestone in the internationalization of the renminbi, and is an affirmation of the success of Chinas economic development and results of the reform and opening up of the financial sector, the Peoples Bank of China said in a statement. China will use this opportunity to further deepen economic reforms and open up the sector to promote global growth, the central bank added.
The IMF announced last year that it would add the yuan to the basket, so actual inclusion is not expected to impact financial markets. But it puts Beijings often opaque economic and foreign exchange policy in the international spotlight as some central banks add yuan assets to their official reserves.
Critics argue that the move is largely symbolic and the yuan does not fully meet IMF reserve currency criteria of being freely usable, or widely used to settle trade or widely traded in financial markets. U.S. Republican presidential nominee Donald Trump has said he will formally label China a currency manipulator if he wins Novembers election.
China stunned investors by devaluing the currency last year and the yuan has since weakened to near six-year lows, adding to worries about already feeble global growth.