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IMF adds yuan to top currency basket

Source: AFP | December 1, 2015, Tuesday | Online Edition

THE International Monetary Fund admitted China's yuan into its elite reserve currency basket on Monday, recognizing the ascendance of the country in the global economy.

The yuan will join the US dollar, euro, Japanese yen and British pound next year in the basket of currencies the IMF uses as an international reserve asset.

IMF Managing Director Christine Lagarde called the decision "an important milestone in the integration of the Chinese economy into the global financial system."

"It is also a recognition of the progress that the Chinese authorities have made in the past years in reforming China's monetary and financial systems."

The move by the IMF executive board, representing the institution's 188 member nations, solidifies China's ambition to see the yuan achieve global status as one of the world's top currencies.

China asked last year for the yuan to be added to the Special Drawing Rights basket. To meet the IMF's criteria, the world's second-largest economy has undertaken a flurry of reforms in recent months, including better access for foreigners to Chinese currency markets, more frequent debt issuance and expanded yuan trading hours.

The board approval had been widely expected after IMF staff experts earlier in November said Chinese authorities had taken the steps necessary for the yuan to be called "freely usable,” and Lagarde endorsed their recommendation.

Lagarde said the yuan's inclusion in the basket was expected to help China open up further to the world economy.

"The continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy," she said.

IMF members can use the SDR basket to obtain currencies to meet balance-of-payments needs. The IMF also issues its crisis loans -- crucial to struggling economies like Greece -- valued in SDRs.

The yuan's entry into the basket takes effect on October 1, 2016.

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