The IMF is widely expected on Monday to say that next year it will add the yuan to its basket of reserve currencies, a status enjoyed only by the US dollar, the euro, the British pound and the Japanese yen. The inclusion would represent recognition that the yuan’s status is rising along with China’s place in global finance.
The IMF is expected to approve inclusion when it meets on Monday. IMF Managing Director Christine Lagarde and a fund staff report have already endorsed the move.
The expected inclusion would mark a crowning achievement for China’s top central banker, Zhou Xiaochuan, and his lieutenants, who have built political support around the idea that the yuan’s status in international finance should match China’s heft as an emerging world power. To meet IMF’s reserve-currency criteria, the central bank pushed through a slew of changes—such as freer interest rates and easier access for foreign investors to China’s markets—despite opposition from some powerful interest groups.
In the near term, inclusion would lead to a modest, less-than-$30 billion in new foreign demand for yuan-denominated assets, estimates Zhang Ming, a senior economist at the Chinese Academy of Social Sciences.