Bonds, Currencies, Emerging Markets, Stocks

Chinese Yuan: More “Significant Work” Is Needed Before Deciding Whether To Grant The Renminbi Reserve Currency Status, IMF Says

The International Monetary Fund said the yuan trails its global counterparts in major benchmarks and that “significant work” in analyzing data is needed before deciding whether to grant the Chinese currency reserve status,” Bloomberg reports.

Yuan China Renminbi

According to the news agency:

IMF staff members also opened the door to a possible delay in any approval with a proposal to postpone by nine months, until September 2016, the implementation of a change in the basket of currencies that make up the lender’s Special Drawing Rights, according to an update on the five-yearly review released Tuesday. The IMF said postponing the change would make the transition to a new basket smoother.

The report suggests that while approval by the IMF board isn’t yet assured, it’s within reach, and the decision will come down to more than just the staff’s assessment. China has been pushing for the yuan to join the dollar, euro, yen and pound in the SDR basket; while countries such as France have welcomed China’s push, the U.S. has urged the nation to keep moving toward a flexible exchange rate and undertaking financial reforms.

The report doesn’t refer to the recent interventions to stem the equities slump. IMF Managing Director Christine Lagarde said last week the interventions shouldn’t derail the SDR review.

China stepped up its crackdown on short-selling of shares on Tuesday, unveiling rules that make it harder for speculators to profit from hourly price changes, as some of the nation’s major brokerages suspended their short-selling businesses, Reuters reported on Tuesday.

International use of the yuan, also known as the renminbi (RMB), has increased during the past 5 years, however from a low base. According to the IMF:

Across a range of indicators, the RMB is now exhibiting a significant degree of international use, especially in Asia and increasingly in Europe.

In 2014, the yuan ranked 7th among currencies as a share of official reserve and constituted 1.1% of official reserves, compared with nearly 64% for the U.S. dollar.

The Chinese currency also ranks outside the top five currencies in terms of debt securities and currency trading. However, the yuan ranks 3rd behind the dollar and euro in terms of trade finance, according to the IMF report.

It should be noted that the IMF wants to assess whether yuan payments between the Chinese mainland and Hong Kong, Macau and Taiwan should be treated as international transactions.


About ETFalpha

Chief ETF Strategist & Co-Founder at EMerging Equity


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