China’s efforts to make the yuan an international currency on a par with the US dollar is to receive a fillip with the International Monetary Fund widely expected to add it to a special basket of global currencies.
Analysts say the shareholders in the Washington-based IMF will vote on Monday to include the yuan, also known as the renminbi, as the fifth member of its special drawing rights currency basket alongside the dollar, the Japanese yen, sterling and the euro.
China has been lobbying for the IMF to add the yuan to its basket of reserve currencies, which it uses to lend to sovereign borrowers. A vote to include the currency in the SDR basket would mark a significant milestone for Beijing, according to experts.
“The direct impact won’t be felt in the near term, not least because implementation of the new basket won’t be until Q3 2016. However the symbolic importance cannot be overlooked,” said Andrew Malcolm, Asia head of capital markets at law firm Linklaters.
“By effectively endorsing the renminbi as a freely useable currency, it sends a strong signal about China’s importance in the global financial markets.”