The Chinese currency China officially joined the unit of account of the International Monetary Fund.
The entrance of the yuan on Saturday in the club of IMF reference currencies is a “historic turning point” for the internationalization of the currency, welcomed the Chinese central bank. She promised to “deepen” financial reforms and the opening of the country.
From Saturday, the Chinese currency is officially part of the unit of account of the International Monetary Fund special drawing rights (SDRs). She joined the US and European currencies and the British pound and the Japanese yen.
It is “a historic step” for the renminbi (another name for the yuan). It “confirms China’s achievements in economic development and the fruits of reform and opening its financial sector,” said the central bank (PBOC) said in a statement.
“China looks this inclusion as a turning point. It will deepen reforms, expand opening up its financial sector and enhance its contributions “to” strengthen the global financial system, “said the PBOC.
2nd largest economy
For several years, China has spared no efforts to make the yuan a reserve currency, at the height of its position as second largest economy, amid very gradual opening of its market.
The knighting by the Washington institution is a diplomatic victory for Beijing. It is lined with a strong symbolic, the yuan officially entering the courtyard of the major world currencies.
This could “accelerate diversification of central bank reserves and sovereign wealth funds in the Chinese currency.” However, they “do not have to adjust strictly to the composition of the SDR” says Dariusz Kowalczyk, Credit Agricole analyst, providing increased their reserves in yuan by 25 to 30 billion.
The PBOC has already signed currency swap agreements (swaps) with thirty central banks. It also increased the quotas of investment in yuan issued to foreign institutions, while encouraging bond issues in yuan on international markets.
However, unlike other currencies stakeholders DTS, the yuan is not fully convertible, and the repatriation of capital invested in China by foreigners remains difficult.
At present, the yuan can fluctuate against the dollar in a range of 2% either side of a pivot-course fixed daily by the central bank. But it blows hot and cold and had decided in August 2015 including a sharp devaluation that had shaken the markets.
Analysts say these restrictions and inveterate Chinese authorities interventionism could drastically limit the appetite of foreign institutions, liquidity soucieuces for the yuan. (Ats / nxp)