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IMF still deliberating granting RMB reserve status

IMF still deliberating granting RMB reserve status

(7 August 2015 – China) The International Monetary Fund (IMF) has decided there needs to be significant work in analysing data before deciding whether to grant the yuan reserve status.

IMF member said the Chinese currency trails its global counterparts in major benchmarks and may delay any approval with a proposal to postpone the decision to implement change in the basket of currencies that make up the lender’s Special Drawing Rights (SDR), for nine months to September 2016.

The IMF said postponing the change would make the transition to a new basket smoother.

China has been pushing for the yuan to join the dollar, euro, yen and pound in the SDR basket; while countries such as France have welcomed China’s push, the United States has urged the nation to keep moving toward a flexible exchange rate and undertaking financial reforms.

The IMF’s executive board, which represents the fund’s 188 member nations, still plans to formally discuss the review toward the end of the year, Siddharth Tiwari, head of the IMF’s Strategy, Policy and Review Department, said in a statement.

“Across a range of indicators, the renminbi (RMB) is now exhibiting a significant degree of international use, especially in Asia and increasingly in Europe,” the report said.

At the same time, the yuan trails other currencies in metrics the fund tracks in determining the SDR basket, according to the report.

To qualify for the basket, currencies must be “widely used” to make payments in global transactions, and “widely traded” in major exchange markets.

Key indicators include the share a currency makes up of official reserves, international banking liabilities and global debt securities, as well as the volume of use in foreign-exchange markets.

Last year, the yuan ranked seventh among currencies as a share of official reserves, behind the four SDR members as well as the Australian and Canadian dollars, according to the IMF.

The report said IMF staffers could include additional indicators to evaluate the yuan, such as cross-border payments and letters of credit of trade finance. The yuan ranks third behind the dollar and euro in terms of trade finance, according to the report.

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