The staff of the International Monetary Fund (IMF) has proposed the inclusion of the Chinese currency Renminbi (RMB) in its currency basket. IMF head Christine Lagarde said on Friday evening in Washington, that experts of her institution had come to the conclusion that China’s currency fulfilled the conditions to qualify as the fifth currency after the US dollar, the Japanese yen, the euro and the British pound, to become part of the currency basket. “I supported this step”, said Lagarde. The decision is now up to the Executive Council of the Fund. They will meet on the 30th of November when she will be presiding for the purpose of discussing the recommendations.
Wether the renminbi is a globally important export currency, which is one of the criteria for inclusion in the basket of currencies, has been discussed for some time. According to Lagarde, the IMF staff was convinced that China’s currency does in fact fulfill the criteria of free usability. This means, it is being used for international transactions and on the major foreign exchange markets. In addition, the Chinese authorities fulfilled all demands that were still outstanding and due in July.
The currency basket of the IMF, values the basis for the artificial currency of the fund, the Special Drawing Rights (SDRs), in which the contributions of IMF members (quotas), as well as their credit limits are measured.
With the inclusion in the basket of currencies, China’s currency takes an important step towards a world reserve currency. This also means a significant increase of prestige for the country.
With the Renminbi’s accession, the so-called Special Drawing Rights (SDR) – a kind of nest-egg for States – will also apply to them. The inclusion strengthens China’s position against the dollar.