IMF adds Renminbi as reserve currency

[Winehole23]

The International Monetary Fund today added China's renminbi into the elite club of currencies that make up the organization’s basic unit of exchange. While being a component of the IMF's Special Drawing Rights move is a political plum for Beijing, it won't drive the internationalization of Chinese financial markets, which will turn on China's willingness to allow foreigners to invest in its largely insulated bond market.


The IMF’s top governing body approved the inclusion of the Chinese currency into the unit of exchange, which the IMF uses to track its own reserves and holdings of its members, and is sometimes used by members for their own transactions. Over the past year, Beijing had pushed strongly for the change, which nominally puts it in the same category as the U.S. dollar, the British pound, the Japanese yen and the euro.


The change at the IMF would take effect in about a year. The renminbi is China's currency; its unit of exchange is the yuan, which is also how many people refer to the currency itself.

http://www.ibtimes.com/chinas-renminbi-joining-imfs-elite-currency-club-2203365

[Winehole23]

IMF rules dictate that a currency be “freely usable,” a debatable proposition in the case of China, which still imposes capital controls and has faced widespread accusations of manipulating its currency to boost exports. Trading in China's currency is emerging in fits and starts, with a hub for it in Hong Kong operating and other efforts in London gaining traction. The IMF staff acknowledged the limited global use of the Chinese currency, but emphasized that the organization’s governing board has wide latitude to make such decisions.


China’s devaluation of its currency in August was widely viewed as a demonstration that Beijing is ready for a more flexible exchange rate structure.