China to continue to push forward financial reforms

WASHINGTON - China will continue to push forward financial reforms after the International Monetary Fund (IMF) decided to include the Chinese currency, the renminbi or Chinese yuan, into its Special Drawing Rights (SDR) basket of currencies, a senior Chinese official said here Tuesday.

The IMF executive board on Monday approved the inclusion of the renminbi into its SDR basket as a fifth currency, along with the US dollar, the euro, the Japanese yen and the British pound, marking a milestone in the renminbi's global march.

"Chinese yuan joining the SDR does not mean  end of reform of the financial sector in China," Chinese Vice Finance Minister Zhu Guangyao said at the Washington DC-based Peterson Institute for International Economics (PIIE).

"President Xi Jinping said to the whole nation reform is an ongoing process ... We must continue reforms," Zhu said after delivering a speech on China's 13th Five-Year Plan, the country's development blueprint for the next five years (2016-2020).

Zhu said it is in China's interest to continue pushing forward reforms and the government has been following the financial reform agenda laid out at the Third Plenary Session of the 18th Communist Party of China Central Committee in late 2013. "That's our guidance. We follow that exactly."

Zhu said the IMF board's decision to include the renminbi in its SDR basket of currencies really reflects "global consensus" on the renminbi's eligibility of joining the currency basket, and it will make the SDR "more representative and attractive," benefiting both China and the world.

Nicholas Lardy, a senior fellow at the PIIE and a leading expert on China's economy, also described the decision as "a win-win for the global economy," dismissing the speculative view of competition between the renminbi and the US dollar.

Lardy said the renminbi-denominated assets now account for roughly 1 percent of global reserves held by central banks and the transition to more holdings of renminbi-denominated assets will be very gradual.

"It should not be thought of in competitive terms, you know, the Chinese are gaining their share at the expense of the US, I think that's a misreading," he said.

PIIE President Adam Posen echoed Lardy's view, saying that "there have been long periods in modern economic history when you have more than one so-called reserve currency."

"Having a more balanced basket, not just in the SDR but in world portfolios" will help reduce the burden of global imbalances, he said. "I think that's something the US and China both want."

Zhu also said the 13th Five-Year Plan is very important for China to complete the building of a moderately prosperous society and overcome the so-called "middle income trap," as the country is making efforts to restructure the economy and shift to an innovation-driven mode.

He said that the average annual growth rate must be at least 6.5 percent during the next five years for China to double the 2010 GDP and the per capita income of both urban and rural residents by 2020.

Zhu said the main purpose of his trip to Washington this week was to discuss the agenda of the 2016 Group of Twenty (G20) summit with US officials as China formally took over the presidency of the G20 on Tuesday.

Chinese President Xi Jinping and his US counterpart, Barack Obama, gave instructions to working teams of both sides to strengthen coordination in the G20 during their bilateral meeting in Paris one day ago, he said, noting that the two countries displayed "really good policy coordination" in the past ten G20 summits.