The International Monetary Fund (IMF) Executive Board has decided to include the Chinese currency renminbi (RMB) in its Special Drawing Rights (SDR) basket, as announced by IMF Managing Director Christine Lagarde on Monday noon, Nov. 30, after the vote by its executive board, China Daily USA reported.
Lagarde said that the decision was made after RMB met all existing criteria. In addition, the RMB will be a freely usable currency effective Oct 1, 2016 and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the euro, the Japanese yen and the British pound.
The IMF director explained that the new SDR basket will be launched next October to provide sufficient lead time for the IMF, its members and other SDR users to adjust to these changes.
Lagarde called the decision "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," Lagarde told reporters during a briefing at IMF headquarters in Washington.
"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," Lagarde added.
An international reserve asset, SDR was created by the IMF in 1969 to supplement the official reserves of member countries. SDRs are allocated to IMF members from time to time, based on each country's quota in the IMF. A total of 204.1 billion SDRs have been allocated to date, with the most recent in 2009 when SDR 182.6 billion was allocated.
The People's Bank of China (PBOC), the central bank, welcomed the IMF decision, calling it an acknowledgement of China's economic development, reform and opening up.
"The inclusion of the RMB in the SDR basket will increase the representativeness and attractiveness of the SDR, and help improve the current international monetary system, which will benefit both China and the rest of the world," the PBOC said in a statement after the IMF announcement.
"It also means that the international community expects China to play a bigger role in the international economic and financial system," the statement said.
China will continue to extend and accelerate economic reforms and financial opening up, as well as contribute to promoting world economic growth, safeguarding financial stability and improving global economic governance, the PBOC added.