IMF Survey : Chinese Renminbi to Be Included in IMF’s Special Drawing Right Basket
IMF News, December 1, 2015
Source details
- Canonical URL
- IMF Survey : Chinese Renminbi to Be Included in IMF’s Special Drawing Right Basket
Other formats
Bibliographic details
- Published: December 1, 2015
Decision and timing
- The Chinese currency renminbi (RMB) is to be included in the basket of currencies which make up the IMF’s Special Drawing Right, or SDR.
- The IMF Executive Board’s determination that the RMB is freely usable and its decision to include the RMB in the SDR basket both take effect on October 1, 2016.
- This is the first time in over 15 years that the list of currencies comprising the SDR has been altered.
Inclusion criteria and assessment
- The most recent review concluded that China and its currency met the two criteria for inclusion in the basket:
- that the issuing country is among the largest exporters in the world; and
- that its currency is “freely usable.”
- A currency is determined to be freely usable when it is widely used to make payments for international transactions and widely traded in the principal exchange markets.
- The review acknowledged recent steps by the Chinese authorities to:
- grant full access for official reserve managers and their agents to the onshore fixed-income and foreign exchange markets; and
- enhance data disclosure.
Revised SDR composition and weights
- The revised SDR basket will be based on the following weights:
- 41.73% for the U.S. dollar
- 30.93% for the euro
- 10.92% for the Chinese RMB
- 8.33% for the Japanese yen
- 8.09% for the British pound
- These weights are derived from a new formula adopted by the IMF in this review.
- According to this new formula, weights are based on:
- the value of the issuers’ exports,
- the amount of reserves denominated in the respective currencies that were held by other monetary authorities,
- foreign exchange turnover, and
- international bank liabilities and international debt securities denominated in the respective currencies.
Implications for the global economy and IMF operations
- Inclusion reflects major shifts in the global economy and recognizes China’s progress in moving toward a more open and market-based economy.
- Since the last SDR review in 2010:
- the use of the RMB in international payments has risen substantially,
- renminbi trading activity in foreign exchange markets covering two of the three major trading time zones has increased significantly, and
- renminbi markets can now accommodate transactions of the magnitude involved in IMF operations.
- Statements from IMF officials:
- Christine Lagarde: “The Executive Board's decision to include the RMB in the SDR basket is an important milestone in the integration of the Chinese economy into the global financial system. It is also a recognition of the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems.”
- Siddharth Tiwari: “As China’s integration continues and further deepens, and is paralleled in other emerging market economies, it could bring about a more robust international monetary and financial system which, in turn, would support the growth and stability of the global economy.”
- Andrew Tweedie: “The RMB’s inclusion will also enhance the attractiveness of the SDR as an international reserve asset by diversifying the basket and making the SDR more representative of the world’s major currencies.”
- Operational impacts:
- As a freely usable currency, the RMB will play an important role in the Fund’s operations because the bulk of the Fund’s lending activities takes place in freely usable currencies.
- The SDR interest rate, which forms the basis for the cost of borrowing from the IMF, will include an RMB instrument starting in October.
- Authorities of all currencies represented in the SDR basket are expected to maintain a policy framework that facilitates operations for the IMF, its membership, and other SDR users in their currencies.
IMF Survey : Chinese Renminbi to Be Included in IMF’s Special Drawing Right Basket — December 1, 2015