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China shores up IMF's first bond issue

CHINA has agreed to buy up to US$50 billion of the International Monetary Fund's first bond issue to diversify its foreign reserves and boost the body's lending strength.

The Managing Director of the International Monetary Fund, Dominique Strauss-Kahn, and the Deputy Governor of the People's Bank of China, Yi Gang, have signed an agreement for China to buy up to 32 billion special drawing rights of the IMF.

An SDR is an interest-bearing IMF asset based on a basket of international currencies including the US dollar, the Japanese yen, the euro and the British pound.

"The agreement offers China a safe investment instrument. It will also boost the fund's capacity to help its membership -- particularly the developing and emerging market countries -- weather the global financial crisis, and facilitate an early recovery of the global economy," said the IMF.

The IMF executive board approved the plan to issue notes to governments on July 1, an unprecedented move to shore up the body's resources to offer financing to countries mired in the financial fallout.

In early June, China expressed the willingness to invest up to US$50 billion in IMF bonds.

China has already called for a new global currency under the International Monetary Fund, showing China's growing weight in the global financial arena in March.


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