BRIJING, Nov 14: In a big boost to China’s plans to internationalise its currency, the IMF staff has proposed to its Executive Board to include the RMB into its special drawing rights (SDR) basket as the fifth currency.
International Monetary Fund (IMF) Managing Director Christine Lagarde said the staff has proposed to the Executive Board to include Chinese currency, the RMB, into its SDR basket as a fifth currency and she supported it, state-run Xinhua news agency reported.
IMF staff assesses that the RMB meets the requirements to be a “freely usable” currency and, accordingly, the staff proposes that the Executive Board determine the RMB to be freely usable and include it in the SDR basket as a fifth currency, along with the British pound, euro, Japanese yen, and the American dollar, the IMF chief said in a statement.
The staff also finds that the Chinese authorities have addressed all remaining operational issues identified in an initial staff analysis submitted to the Executive Board in July, said a paper issued to the Executive Board on the quinquennial review of the SDR yesterday.
“I support the staff’s findings. The decision, of course, on whether the RMB should be included in the SDR basket rests with the IMF’s Executive Board. I will chair a meeting of the Board to consider the issue on November 30,” Lagarde said.
China has welcomed the IMF move.
The People’s Bank of China (PBoC), the country’s central bank, said “the inclusion of the RMB in the SDR basket would increase the representativeness and attractiveness of the SDR, and help improve the current international monetary system, which would benefit both China and the rest of the world.”
“We hope the RMB’s inclusion in the SDR basket will be supported by the international community,” the PBoC said, adding that “China will continue to deepen economic reforms and promote financial opening up.”
If the IMF Board agrees to include the RMB into the SDR basket this month, the actual effective date will be September 30, 2016.
In August, the IMF extended the current SDR valuation basket by nine months from December 31, 2015 to September 30, 2016 to facilitate the continued smooth functioning of SDR-related operations and the preparation for a possible new SDR currency.
The IMF reviews the currencies in the SDR basket every five years, and whether to add the RMB to the basket is a major issue for this year’s assessment.
China will continue to support RMB’s bid for inclusion in the IMF SDR basket and push ahead with capital account liberalisation and the internationalisation of RMB, according to the proposals recently unveiled on formulating the country’s 13th Five-Year Plan (2016-2020). (PTI)
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