Christine Lagarde, managing director of the International Monetary Fund (IMF), said Friday that the IMF staff has proposed the Executive Board to include the Chinese currency, the RMB, into its special drawing right (SDR) currency basket as a fifth currency and she supports it.
IMF staff assesses 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 U.S. dollar, the IMF chief said in a statement.
The staff also finds that the Chinese authorities have addressed all remaining operational issues identified in an initial staff analysis submitted to the Executive Board in July, said a paper issued to the Executive Board on the quinquennial review of the SDR on Friday.
"I support the staff's findings. 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 (PBOC), China's central bank, has expressed its welcome to Lagarde's welcome.
"The inclusion of the RMB in the SDR basket would increase the representativeness and attractiveness of the SDR, and help improve the current international monetary system, which would benefit both China and the rest of the world," said the PBOC in a statement.
"We hope the RMB's inclusion in the SDR basket will be supported by the international community," the PBOC said, adding that "China will continue to deepen economic reforms and promote financial opening up."
If the IMF Board agrees to include the RMB into the SDR basket this month, the actual effective date will be Sept. 30, 2016. In August, the IMF extended the current SDR valuation basket by nine months from Dec. 31, 2015 to Sept. 30, 2016 to facilitate the continued smooth functioning of SDR-related operations and the preparation for a possible new SDR currency.
The IMF reviews the currencies in the SDR basket every five years, and whether to add the RMB to the basket is a major issue for this year's assessment. China will continue to support RMB's bid for inclusion in the IMF SDR basket and push ahead with capital account liberalization and the internationalization of RMB, according to the proposals recently unveiled on formulating the country's 13th Five-Year Plan (2016-2020).
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