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China’s Renminbi Is Approved by I.M.F. as a Main World Currency

Posted by on December 6, 2015 in World with 16 Comments

IMF ChristineLagarde-Gimped-and-Compressed

By Keith Bradsher |New York Times

HONG KONG — The Chinese renminbi was anointed as one of the world’s main elite currencies on Monday, a milestone decision by the International Monetary Fund that underscores the country’s rising financial and economic heft.

The move will help pave the way for broader use of the renminbi in trade and finance, securing China’s standing as a global economic power. Just four other currencies — the dollar, the euro, the pound and the yen — have the I.M.F. designation.

Related Article:Greece’s Leader Slams IMF For Intimidating Tactics

But the path to the I.M.F. decision, a bumpy process that stretches back years, also introduced new uncertainty into China’s economy and financial system.

To meet the I.M.F. requirements, China was forced to give up some of its tight control over the currency, culminating in the abrupt devaluation of the renminbi that shook global markets in August. The changes could inject fresh volatility into the country, at a time when its economy is already slowing.

Renminbi, also called yuan, gains a benchmark status.CreditWoo He/European Pressphoto Agency 

Many central banks follow this benchmark in measuring their reserves, which countries hold to help protect their economies in times of trouble. By adding the renminbi to this group, the I.M.F. effectively says that it considers the currency to be safe, reliable and freely usable.

It is a “recognition of the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems,” Christine Lagarde, the managing director of the I.M.F., said in a statement 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.”

Related Article: 5 of 10 Top Economies in the World Drop the Dollar

The designation is a point of pride for Beijing, which had made it one of its highest economic policy priorities.

In the months before the fund’s decision, China moved aggressively to expand the currency’s standing on a global stage, building trading hubs in Europe and developing a raft of renminbi-denominated bonds and commodity contracts. In devaluing the currency, China changed the way it sets the value of the renminbi each morning, allowing market forces to play a bigger role.

The I.M.F. decision also says a lot about the waning influence of Europe: The renminbi is mainly replacing part of the euro’s role in the special drawing rights. Assessing currencies for the accounting system, the fund put a greater emphasis on their different roles in international finance. The dollar still dominates in finance and trade, while the renminbi is quickly gaining ground on the euro.

The United States Treasury said it “supported” the I.M.F. decision.

Besides its symbolic weight, the I.M.F. label, which will take effect at the end of September next year, carries specific benefits. The renminbi will become one of the currencies used in the disbursement and repayment of international bailouts denominated in the fund’s accounting unit, like Greece’s debt debate.

Related Article :Greek Financial Crisis Continues to Grow: Big Debate Over Bail Out or New Paradigm

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16 Reader Comments

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  1.' Peter-Shane Southward says:

    It’s not a threat to the US dollar!

  2.' Dan Simpson says:

    China …….is this worlds biggest threat ……period..!!

  3.' Darla Williams says:

    does this mean our 401 will be nonexistant?

  4.' Marianne Smeding says:

    So now IMF can stretch its greedy claw deep into China and rape it economically like Greece was raped and looted and so many others?Read this The IMF formula for poverty:

  5.' Terrance Snyder says:

    Bonnie Hoyer , did you know this ?

  6.' Chin Yi Lin says:

    It meat CYN’s Special Depreciation Right.

  7.' Mary Donnelly says:

    The “Powers that be” are slowly reshaping existing puzzle pieces to form a new picture …one that exhalts the New World Order.

    Brought to you through your civil obedience and taxpayer dollars.
    p.s. How are you doing with that slow kill approach to eugenics?

  8.' Rahul Thakkar says:

    Sharath Chandra

  9.' Michael Costello says:

    That face cant be real

  10.' Frank Green says:

    China has leant the US and UK vast sums of money over the last decade to prop up Government spending; suspect that this IMF move is a way for the US and UK to renege on paying their debts – if so, it is a dangerous game.

  11.' Christian Dunn says:

    This was big news that was completely skipped by the media. The obvious end game here is for trade currency to move off the dollar, which is understandable considering the irresponsible spending (debt) of the last 15 years. The implications of this are much larger than the average American understands. Every sign is that the US is in economic and cultural decline and sliding fast.

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