Yuan's prospects for SDR advance: official

An employee counts yuan banknotes at a bank in Huaibei, Anhui province.[Photo/Agencies]

President Xi Jinping and Western leaders reached wide consensus on international financial governance reform during their recent meetings, a senior Chinese official said on Saturday, when commenting on the International Monetary Fund (IMF) managing director’s support for the yuan join the special drawing rights (SDR) basket of currencies.

"President Xi Jinping has exchanged ideas on prospects of global financial governance reform during his meeting with leaders of the US, UK, Germany and France, and much consensus has been reached," Zhu Guangyao, vice-minister of finance, told reporters at a briefing prior to the G20 summit on Sunday and Monday.

 Zhu said they have discussed international monetary reform and the SDR currency basket of currencies, especially the prospects for the inclusion of the yuan, or renminbi (RMB).

 Xi paid state visits to the US and UK in September and October, and shortly after that, German Chancellor Angela Merkel and French President Francois Hollande visited China.

"Their meetings were fruitful," Zhu said.

 Before her departure for the G20 summit, Christine Lagarde, managing director of the IMF, said her staff issued a paper to the IMF Executive Board on Saturday on the quinquennial review of the SDR.

 She said a key focus of the board review is whether the renminbi, which continues to meet the export criterion for inclusion in the SDR basket, also meets the other existing criteria, that the currency be "freely usable", which is defined as being "widely used" for international transactions and "widely traded" in the principal foreign exchange markets.

 In the paper, she said IMF staff agree that the RMB meets the requirements to be a freely usable currency and, accordingly, the staff proposes that the executive board determine the RMB to be freely usable and include it in the SDR basket as a fifth currency, along with the British pound, euro, Japanese yen and the US dollar.

 "I support the staff’s findings," Lagarde said. "The decision, of course, on whether the RMB should be included in the SDR basket rests with the IMF’s executive board. I will chair a meeting of the board to consider the issue on November 30," Lagarde said.

 The People's Bank of China, in a statement, welcomed the comments by Lagarde, which it considers an acknowledgment of the progress in China's recent economic development, reform and opening up.

 It said the inclusion of the RMB in the SDR basket would increase the representation and appeal of the SDR and help improve the current international monetary situation.