China’s Renminbi Is Approved as a Main World CurrencyPosted: November 30, 2015
The I.M.F. decision will help pave the way for broader use of the renminbi in trade and finance, securing China’s standing as a global economic power.
HONG KONG — Keith Brasher reports: The International Monetary Fund on Monday approved the Chinese renminbi as one of the world’s main central bank reserve currencies, a major acknowledgment of the country’s rising financial and economic heft.
The I.M.F. decision will help pave the way for broader use of the renminbi in trade and finance, securing China’s standing as a global economic power. But it also introduces new uncertainty into China’s economy and financial system, as the country was forced to relax many currency controls to meet the I.M.F. requirements.
The changes could inject volatility into the Chinese economy, since large flows of money surge into the country and recede based on its prospects. This could make it difficult for China to maintain its record of strong, steady growth, especially at a time when its economy is already slowing.
The I.M.F. will start including the renminbi in the fund’s unit of accounting, the so-called special drawing rights, at the end of September. The renminbi will take its place alongside the dollar, the euro, the yen and the pound.
Many central banks follow this benchmark in building their reserves, so countries could start holding more renminbi as a result. China will also gain more influence in international bailouts denominated in the fund’s accounting unit, like Greece’s debt deal.
The decision to include the renminbi “is an important milestone in the integration of the Chinese economy into the global financial system,” Christine Lagarde, the managing director of the I.M.F., said in a statement. “It is also a recognition of the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems….(read more)
Source: The New York Times