China vows deeper financial reform
Print Edition
China’s Cabinet, the State Council, yesterday welcomed the IMF decision to include the yuan in its Special Drawing Rights basket, seeing an opportunity for further financial reform and opening-up.
The International Monetary Fund decision is recognition of China’s reform and opening-up achievements, and will enable China to be more engaged in global economic governance, according to a statement released after an executive meeting of the State Council presided over by Premier Li Keqiang.
The State Council reiterated that China will stick to a managed, floating exchange rate mechanism, keep the currency stable at a reasonable level and make it convertible under the capital account “in an orderly manner.”
The IMF will add the yuan to its SDR basket from October 1, 2016, with a weighting of 10.92 percent, as the currency has “met all existing criteria.” The weighting of the other currencies in the basket is 41.73 percent for the US dollar, 30.93 percent for the euro, 8.33 percent for the yen and 8.09 percent for the pound.
Created by the IMF in 1969, the SDR is an international reserve asset supplementing members’ official reserves. It can be exchanged among governments for freely usable currencies in times of need.
IMF Managing Director Christine Lagarde described the decision as “an important milestone in the integration of the Chinese economy into the global financial system.”
Also at yesterday’s meeting, the State Council decided to allow several regions in Zhejiang and Jilin provinces to pilot approaches aimed at easing financing difficulties for small businesses and improving rural financing.
Free trade zones in Guangdong, Tianjin and Fujian will be given the green light to experiment with cross-border yuan use, capital account convertibility and cross-border financing.
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