China’s yuan moved closer to joining other top global currencies in the International Monetary Fund’s benchmark foreign exchange basket on Friday after Fund staff and IMF chief Christine Lagarde gave the move the thumbs up.
The recommendation paves the way for the Fund’s executive board, which has the final say, to place the yuan CNY=CFXS CNY= on a par with the U.S. dollar .DXY, Japanese yen JPY=, British pound GBP= and euro EUR= at a meeting scheduled for Nov. 30.
Joining the Special Drawing Rights (SDR) basket would be a victory for Beijing, which has campaigned hard for the move, and could increase demand for the yuan among reserve managers as well as marking a symbolic coming of age for the world’s second-largest economy.
Staff had found the yuan, also known as the renminbi (RMB), met the criteria of being “freely usable,” or widely used for international transactions and widely traded in major foreign exchange markets, Lagarde said.
“I support the staff’s findings,” she said in a statement immediately welcomed by China’s central bank, which said it hoped the international community would also back the yuan’s inclusion.
Staff also gave the green light to Beijing’s efforts to address operational issues identified in a report in July, Lagarde said.
The executive board, which represents the Fund’s 188 members, is seen as unlikely to go against a staff recommendation and countries including France and Britain have already pledged their support for the change. This would take effect in October 2016, during China’s leadership of the Group of 20 blocs of advanced and emerging economies.