WASHINGTON, D.C.: The International Monetary Fund’s (IMF) consideration of China’s yuan for inclusion in its SDR basket of elite currencies is on track with a decision possibly this month, Fund spokesman Gerry Rice said on Thursday (Friday in Manila).
With inclusion of the yuan in the SDR makeup a key policy goal of Beijing, Rice declined to speculate on the decision.
But he noted that a crucial qualification, international use of the currency, also called the renminbi, is progressing.
“The renminbi internationalization continues,” Rice told reporters at a news briefing.
The board of the International Monetary Fund is expected to discuss China’s application to join the SDR this month.
The Fund has been generally receptive to the idea that the yuan could join the US dollar, British pound, the euro and Japanese yen in the makeup of the SDR (special drawing right).
While not a freely traded currency, the SDR is important as an international reserve asset, and because the IMF issues its crisis loans, crucial to struggling economies like Greece, valued in SDRs.
China, now the world’s second-largest economy, asked last year for the yuan to be added to the grouping.
But until recently the yuan’s exchangeability on international markets has been too tightly controlled by Beijing for it to fully qualify.
On August 4 the IMF said the currency fell short of meeting all the standards for inclusion, particularly on being “freely usable” in international finance.
But China’s economic slowdown has complicated Beijing’s efforts to widen its use and movements in its valuation, especially because the IMF reviews the SDR basket only every five years, and the deadline for the current review is the end of the year.
In a move seen as trying to accommodate China’s push for inclusion, on August 19 the Fund announced that it had extended by nine months the implementation of the revision, giving more time for adjustment to the potential inclusion of the yuan.
So that if a decision to include the yuan is made this month, that actual inclusion could take place as late as September 30, 2016, giving Beijing more time to prepare.
“The extension would also allow users sufficient lead time to adjust in the event that a decision were to be taken to add a new currency to the SDR basket,” the IMF said at the time.