Chinese yuan joins IMF currency basket in "historic milestone"

The International Monetary Fund is adding China's yuan on Saturday to the currencies that the crisis lender uses as a measure of value, alongside the dollar, euro, yen and pound sterling.

The move puts the Chinese economy into an elite club of countries with reserve currencies.

China, which has grown rapidly in recent decades to become the world's second-largest economy, has long sought to make the yuan into a global reserve currency, including the IMF designation.

In a statement Friday in Washington, IMF chief Christine Lagarde called the yuan action an "historic milestone."

The change "reflects the ongoing evolution of the global economy" and the IMF's readiness to adapt, she said.

Lagarde urged China to continue reforms to open and modernize its economy and make the yuan more attractive as a reserve currency.

"The [yuan's] inclusion reflects the progress made in reforming China's monetary, foreign exchange, and financial systems, and acknowledges the advances made in liberalizing and improving the infrastructure of its financial markets," she said.

"The continuation and deepening of these efforts, with appropriate safeguards, will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy."

After a recommendation from staff at the Washington-based crisis lender, the executive board decided in November 2015 that the yuan met all criteria for inclusion in the IMF's so-called currency basket, a weighted daily average of the market exchange rates of the now five currencies. The basket is more stable than any of the individual major currencies alone.

The average is used as a measure of value for the IMF's "special drawing rights," which quantify how much reserve currency each of the 188 member countries can call on in the event of balance-of-payment problems.

The addition of the yuan is the first change in the IMF currency basket since 1999, when the euro replaced the German mark and French franc. The IMF established its so-called special drawing right, which the currency basket represents, as an international reserve asset in 1969.

Last update: Sat, 01/10/2016 - 00:05
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