Top bank official welcomes IMF decision
Print Edition
China will reduce its interventions in the exchange rate system and maintain the pace of financial opening-up after the yuan was included in the International Monetary Fund’s basket of reserve currencies, a central bank official said yesterday.
The inclusion marks a short-term victory in the internationalization of the yuan, but it requires long-term reforms from China’s monetary authorities to consolidate the status, said Yi Gang, deputy governor of the People’s Bank of China, at a news briefing in Beijing.
“I feel happy, calm, and humble about the yuan’s inclusion into the IMF basket,” Yi said. “Happy because of the long-term significance of the inclusion. Calm because of the many preparations we’ve made for the issue. And humble because we understand the gap between us and the world’s mature markets.”
On Monday, the IMF’s executive board, which represents the fund’s 188 members, decided that the yuan met the standard of being “freely usable” and will join the dollar, euro, pound and yen in its Special Drawing Rights basket.
The yuan will take a 10.92 percent weighting in the basket, the third largest of the five, when the addition takes effect on October 1 next year.
While being an artificial currency and not freely traded, the SDR is important as an international reserve asset. The IMF issues its crisis loans valued in SDRs to support struggling economies.
The status will potentially lift global central banks’ reserves in yuan, force greater opening-up of the domestic capital market, and boost international investors’ awareness and confidence in the currency, economists have said.
Yi said the benefits are long term, and China will gradually open up investment channels to allow greater cross-border capital flows both in and out of the country.
Central banks, reserve managers, and pension funds “will certainly” consider increasing holding of the yuan, contributing to an inflow of capital, while Chinese investment and consumption overseas will contribute to an outflow, Yi said.
“We will fully consider the factors of inflow and outflow, and release policies in a balanced way to suit the two-way needs,” Yi said.
The authority aims for “very little” intervention in the market and a “clean” floating exchange rate system, as opposed to the current managed floating one.
Yi said the yuan’s inclusion into the SDR could help stabilize valuation of the yuan, making people’s assets more valuable over the long term.
The inclusion will also make the yuan more widely used offshore, making it easier for travelers to shop and businesses to invest offshore with the yuan.
Kamel Mellahi, professor of strategy at Warwick Business School, said the inclusion of the yuan is a huge symbolic victory for China, but comes with strings attached. “China has been loosening its tight grip on the management of the yuan for a while, but now the PBOC is going to come under immense pressure to be more transparent and improve its way of communicating with international markets,” Mellahi said.
Fitch Ratings said the inclusion will have no immediate effect on China’s sovereign credit profile.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
