The International Monetary Fund (IMF) has decided to include the yuan in its basket of reserve currencies, a strong sign of China’s growing heft in the global economy, in a move that challenges the long domination of the U.S. dollar, the Japanese yen, the Euro and the British pound.
“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. The continuation and deepening of these efforts 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.” IMF Managing Director Christine Lagarde was quoted as saying in an IMF statement.
The IMF said the addition will take place from October 1, 2016. The yuan will have a 10.92 percent weighting in the basket. Weightings for the dollar will be 41.73 percent, for the euro 30.93 percent, 8.33 percent for the yen and 8.09 percent for the British pound. The dollar currently accounts for 41.9 percent of the basket, while the euro accounts for 37.4 percent, the pound 11.3 percent and the yen 9.4 percent.
The People’s Bank of China said the yuan’s inclusion in the SDR basket will be supported by the international community. “”The inclusion of the RMB in the SDR basket would increase the representativeness and attractiveness of the SDR, and help improve the current international monetary system, which would benefit both China and the rest of the world,” it said in a statement, adding that China will continue to deepen economic reforms and promote financial opening up.