RMB inclusion into the SDR basket benefits China and IMF
- By Zhang Jingwei
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E-mail China.org.cn, November 28, 2015
It will be a win-win result for China and IMF
For the IMF, the SDR basket needs the RMB, too. At present, there are four international currencies in its basket - the U.S. dollar, British pound, the Euro and Japanese yen - representing the highest level of global financial governance.
China is the largest goods trading country and the second largest economy with foreign exchange reserves ranking first in the world. The inclusion of the RMB into the SDR currency basket is conducive to enhancing the representation and appeal of the SDR. As President Xi Jinping said, it will help improve the international monetary system and uphold global financial stability. So, having interests in common in this matter, China and the IMF fit in easily with each other.
The IMF knows clearly that only reform can bring about sustainable development. In 2010, the IMF created a reform program to improve the discourse right of the emerging markets including China. However, this reform program was blocked by the U.S. Congress. The example of the AIIB shows that, once an old order won't recognize China's power, a new order will start all over again.
The IMF is very sensible, too. It has a very good grasp of the rhythm of its reform to help it keep pace with the times. In August, the IMF still had doubts about "the free convertibility of the RMB." However, three months later the IMF announced that all the previously pending operational issues (free convertibility) had been solved by the Chinese government.
The IMF's high efficiency is the result of its cooperation and coordination with China. It is also the result of cautious support from the United States. It can be said that, the RMB's inclusion into the SDR basket, which will be discussed and voted on November 30, is already an event of big probability. By October of next year, the RMB will become one of the genuine global convertible currencies.
Statistics show the RMB's decisive influence
Currently, the Chinese yuan has exceeded the Japanese yen to become the world's fourth largest payment currency. If it is successfully included into the SDR basket, the RMB will account for roughly 14-16 percent of the SDR basket, standing behind the U.S. dollar (41.9 percent) and Euro (37.4 percent), and in front of the British pound (11.3 percent) and Japanese yen (9.4 percent).
The statistics mean a win-win result for the IMF and China. For the former, as a traditional global financial institution, it will still maintain global leadership because of its openness. As for the latter, the RMB will become a global currency, thus improving China's financial discourse in the global currency order.
The writer is a researcher of the Charhar Institute.
This article was translated by Li Jingrong based on the original unabridged version published in Chinese.
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