{"id":1858,"date":"2015-06-03T08:57:12","date_gmt":"2015-06-03T07:57:12","guid":{"rendered":"http:\/\/blogg.lnu.se\/china-research\/?p=1858"},"modified":"2015-06-03T08:57:12","modified_gmt":"2015-06-03T07:57:12","slug":"should-the-yuan-become-part-of-sdr-4","status":"publish","type":"post","link":"https:\/\/blogg.lnu.se\/china-research\/?p=1858","title":{"rendered":"Should the Yuan Become Part of SDR?"},"content":{"rendered":"<p>Chinese statements and domestic debate make increasingly clear that China soon wants to become part of the International Monetary Fund\u2019s (IMF\u2019s) artificial currency, the so-called Special Drawing Rights (SDRs) \u2013 also described as kind of reserve currency for the IMF-member countries. Currently, one SDR contains fixed amounts of four currencies denominated in USD, i.e. somewhat above 40 percent for the USD and slightly below 40 percent for the EUR plus around 10 percent for both the GBP and the JPY.<\/p>\n<p>In January 2016, the Chinese want their renminbi (RMB) to become the fifth currency in the SDR basket. The question, however, is whether China already is mature for such a big step. To get there, some main criteria for SDR entry have to be met:<\/p>\n<p>&#8211; the size of the country\u2019s exports;<\/p>\n<p>&#8211; the currencies included in SDRs should be \u201cwidely used\u201d and \u201cwidely traded\u201d<\/p>\n<p>The <em>first<\/em> criterion, of course, would be easily met by China, the no 1 exporting country in the world.<\/p>\n<p>The evaluation of the <em>second <\/em>criterion with its two parts, however, is much more complicated. One must certainly note the RMB today is widely \u2013 and increasingly &#8211; used when it comes to international trade finance. Chinese RMB or yuan have also a growing weight in the composition of currency reserves in an increasing number of central banks.<\/p>\n<p>Consequently, the possible membership of the RMB in the SDR composition will probably be decided by the interpretation of the question whether the Chinese currency is \u201cwidely traded\u201d \u2013 which in my view should be related to <em>free<\/em> forex trading of all over the world. This is currently not the case. The IMF is talking more precisely about \u201cwidely traded in the principal exchange markets\u201d which, however, opens for broad interpretations. As the IMF expressed the issue very recently: the future inclusion of the RMB in the SDR is not a matter of \u201cif\u201d &#8211; but of \u201cwhen\u201d.<\/p>\n<p>Altogether, I feel strongly that joining the SDR by the RMB already in January 2016 would be premature. I share the view that China will be there at some point in the future. Reforms of the domestic financial system and the gradual deregulation of the capital balance seem to be much more important than the RMB\u2019s joining of the SDR already in a couple of months \u2013 and not to forget the need of much better transparency. But we know that the Executive Board has the mandate to change the entry criteria, by, for example, giving emerging markets more influence in IMF decisions.<\/p>\n<p><em>Hopefully, the decision by the Executive Board of the IMF will be based purely on economic, financial and institutional criteria \u2013 and not on political considerations. Nota bene: This is no opinion against emerging markets per se which I indeed have sympathized with since many years ago.<\/em><\/p>\n<p>Sources:\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<a href=\"http:\/\/www.imf.org\/external\/np\/pp\/eng\/2011\/092311.pdf\">http:\/\/www.imf.org\/external\/np\/pp\/eng\/2011\/092311.pdf<\/a>\u00a0\u00a0 <a href=\"http:\/\/www.imf.org\/external\/np\/exr\/facts\/sdr.htm\">http:\/\/www.imf.org\/external\/np\/exr\/facts\/sdr.htm<\/a><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/image.lnu.se\/image.ashx?id=117818&amp;w=110\" alt=\"\" width=\"110\" height=\"136\" \/><\/p>\n<p><strong><em>Hubert Fromlet<\/em><\/strong><em><br \/>\n<\/em>Senior Professor of International Economics, Linnaeus University<br \/>\n<a href=\"..\/editorial-board\/\">Editorial board<\/a><\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/blogg.lnu.se\/china-research\">Back to Start Page<\/a><em><br \/>\n<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Chinese statements and domestic debate make increasingly clear that China soon wants to become part of the International Monetary Fund\u2019s (IMF\u2019s) artificial currency, the so-called Special Drawing Rights (SDRs) \u2013 also described as kind of reserve currency for the IMF-member countries. Currently, one SDR contains fixed amounts of four currencies denominated in USD, i.e. somewhat [&hellip;]<\/p>\n","protected":false},"author":174,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13398],"tags":[],"class_list":["post-1858","post","type-post","status-publish","format-standard","hentry","category-china-2"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\r\n<title>Should the Yuan Become Part of SDR? - China Research<\/title>\r\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/blogg.lnu.se\/china-research\/?p=1858\" \/>\r\n<meta property=\"og:locale\" content=\"en_US\" \/>\r\n<meta property=\"og:type\" content=\"article\" \/>\r\n<meta property=\"og:title\" content=\"Should the Yuan Become Part of SDR? - China Research\" \/>\r\n<meta property=\"og:description\" content=\"Chinese statements and domestic debate make increasingly clear that China soon wants to become part of the International Monetary Fund\u2019s (IMF\u2019s) artificial currency, the so-called Special Drawing Rights (SDRs) \u2013 also described as kind of reserve currency for the IMF-member countries. Currently, one SDR contains fixed amounts of four currencies denominated in USD, i.e. somewhat [&hellip;]\" \/>\r\n<meta property=\"og:url\" content=\"https:\/\/blogg.lnu.se\/china-research\/?p=1858\" \/>\r\n<meta property=\"og:site_name\" content=\"China Research\" \/>\r\n<meta property=\"article:published_time\" content=\"2015-06-03T07:57:12+00:00\" \/>\r\n<meta property=\"og:image\" content=\"https:\/\/image.lnu.se\/image.ashx?id=117818&amp;w=110\" \/>\r\n<meta name=\"author\" content=\"Hubert Fromlet, Kalmar\" \/>\r\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\r\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Hubert Fromlet, Kalmar\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\r\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/blogg.lnu.se\/china-research\/?p=1858\",\"url\":\"https:\/\/blogg.lnu.se\/china-research\/?p=1858\",\"name\":\"Should the Yuan Become Part of SDR? - China Research\",\"isPartOf\":{\"@id\":\"https:\/\/blogg.lnu.se\/china-research\/#website\"},\"datePublished\":\"2015-06-03T07:57:12+00:00\",\"dateModified\":\"2015-06-03T07:57:12+00:00\",\"author\":{\"@id\":\"https:\/\/blogg.lnu.se\/china-research\/#\/schema\/person\/7dbc3e79d44dfa0d6bb4e1f625ad2ae5\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/blogg.lnu.se\/china-research\/?p=1858\"]}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/blogg.lnu.se\/china-research\/#website\",\"url\":\"https:\/\/blogg.lnu.se\/china-research\/\",\"name\":\"China Research\",\"description\":\"A discussion forum on emerging markets, mainly China  \u2013                                          from a macro, micro, institutional and corporate angle.\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/blogg.lnu.se\/china-research\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/blogg.lnu.se\/china-research\/#\/schema\/person\/7dbc3e79d44dfa0d6bb4e1f625ad2ae5\",\"name\":\"Hubert Fromlet, Kalmar\",\"url\":\"https:\/\/blogg.lnu.se\/china-research\/?author=174\"}]}<\/script>\r\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Should the Yuan Become Part of SDR? - China Research","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/blogg.lnu.se\/china-research\/?p=1858","og_locale":"en_US","og_type":"article","og_title":"Should the Yuan Become Part of SDR? - China Research","og_description":"Chinese statements and domestic debate make increasingly clear that China soon wants to become part of the International Monetary Fund\u2019s (IMF\u2019s) artificial currency, the so-called Special Drawing Rights (SDRs) \u2013 also described as kind of reserve currency for the IMF-member countries. 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