Beijing (China) (AFP) – China is in talks with the International Monetary Fund for the Washington-based institution to add the yuan to its basket of reserve currencies, a top banking official said Thursday as Beijing seeks a greater global role for the unit.
It hopes the yuan will become part of the IMF’s “special drawing rights” (SDR) assets “in the foreseeable future”, said vice central bank governor Yi Gang.
At present, SDRs are made up of only the US dollar, the euro, the Japanese yen and the British pound.
But Yi said China’s rise to become the world’s second-largest economy had made the yuan, also known as the renminbi, the world’s second largest trade financing currency and sixth most widely used transaction currency.
Including the yuan in SDRs will “undoubtedly” make the IMF’s unit more “representative” of the global economic landscape, said Yi, who is also head of the State Administration of Foreign Exchange.
“We are evaluating the matter and actively communicating with our colleagues at the IMF,” he told reporters on the sidelines of the Communist-controlled National People Congress legislature.
The global lender’s executive board reviews the basket composition every five years, with the next examination set to take place this year.
Criteria for inclusion in SDRs include both how widely a currency is used, and that it is “freely usable”.
China still keeps a tight grip on the yuan’s value, controls which led the IMF to disqualify the yuan in its last review in November 2010, but Yi said it was “developing in the direction of a freely usable currency”.
“We hope our colleagues at the IMF will take into sufficient account the progress in the international use of the yuan and include the yuan into the SDR’s currency basket in the foreseeable future,” he added.
The country has set up yuan clearing arrangements with 10 countries and regions and signed currency swap agreements with 28 central banks.
Calls for the yuan to be included into the SDR basket emerged in the wake of the global financial crisis and disgraced former IMF chief Dominique Strauss-Kahn in 2011 said such a move would promote monetary stability.
But the IMF said later in the year that it was not prepared to adjust the formula.