IMF Approves China’s Reniminbi As World’s Recognised Currency
Posted by admin | 8 years ago | 3,281 times
China has experienced a major breakthrough in the country’s rising financial and economic heft with the International Monetary Fund’s, IMF, approval of the use of China’s Renminbi as one of world’s recognised currency.
The decision which will introduce new uncertainty for china’s economy and financial system will also pave the way for broader use of the currency in trade and finance.
It is also expected to secure the nation’s standing as a global economic power.
The changes may inject volatility into the Chinese economy, since large flows of money surge into the country and recede based on its prospects. This could make it difficult for China to maintain its record of strong, steady growth, especially at at a time when it economy is already slowing.
The I.M.F. will start including the renminbi in the fund’s unit of accounting, of the special drawing rights. Many central banks follow this benchmark in building their reserves, so countries could start holding more renminbi as a result.
China will also gain more influence in international bailouts denominated in the fund’s accounting unit, like Greece’s debt deal.
Chinse President, xi Jinping had in November said the new status of the currency will improve the international monetary system and safeguard global financial stability.
China’s leadership has also made it a priority to join this group of currencies, naming it in October as one of their highest economic policy priorities in the coming years.
In the months before the I.M.F. decision, China took several actions to make sure that the renminbi was more widely embraced. China did so partly to meet the I.M.F.’s rule that a currency must be “freely usable” before it can be included in this benchmark.
China and Britain have sold renminbi-denominated sovereign bonds for the first time in London, which has emerged as Europe’s hub for the currency. Even Hungary has announced plans to issue its own renminbi-denominated bonds as well, while the Ceinex exchange in Frankfurt has begun trading funds this month based on renminbi bonds. Preparations began to trade renminbi-denominated oil contracts in Shanghai, where copper and aluminum contracts are already sold.
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