Published March 8, 2010
China may want slot for yuan in IMF currency basket
Move will have important implications for yuan's liberalisation
By ANTHONY ROWLEY
IN TOKYO
IN A move that could further undercut Japan's role as Asia's number one economic and financial power, China is seeking to have its currency included in the basket that makes up the International Monetary Fund's special reserve currency, according to reports.
Power play: For the yuan to be included in the IMF's Special Drawing Rights, China would have to liberalise its capital transactions, says Sankei Shimbun
The reports, published in Japan's Sankei Shimbun newspaper at the weekend, quoted currency authorities in China and appear to have originated at a press conference given by People's Bank of China governor Zhou Xiaochuan during the National People's Congress in Beijing.
They come at a time when Chinese leaders are envisaging an expanded role for Special Drawing Rights or SDRs, which are the IMF's special reserve currency.
Moves to have the yuan form part of the SDR - which currently consist only of the US dollar, the euro, the pound and the yen - would have important implications for liberalisation of the Chinese currency and its currently pegged exchange rate.
The move would also support China's attempt to secure leading managerial positions - possibly including the managing directorship of the IMF - in the not too distant future.
As reported in The Business Times earlier, the IMF may be preparing to relinquish its custom of having only European managing directors, in favour of an Asian national. As the only Asian nation whose currency is part of the SDR, Japan is best placed to secure the slot but China may not be far behind.
'It will be important to promote quota and governance reform in the IMF,' the People's Bank of China said in a statement at the weekend in which it called also for China and other emerging economies to be given a greater say in management of the IMF.
China, which a year ago, sought eventual replacement of the US dollar as the world's main reserve currency with the SDR, is now aiming at yuan's inclusion in the SDR basket by 2015, Sankei Shimbun said.
The composition of the SDR basket is reviewed every five years and the last such review was in January 2006 with the next one being due towards the end of this year. At present the dollar accounts for 44 per cent of the SDR basket, the euro 34 per cent and the yen and sterling 11 per cent each.
For the yuan to be included, China would have to liberalise its capital transactions, the Sankei Shimbun report said.
Also, with its 'loose' monetary policies, the US might not agree to such a proposal unless China revalues the yuan against the dollar, the report added.
China will keep the yuan exchange rate 'basically stable' in 2010, Mr Zhou said at the weekend press briefing. China has managed the yuan exchange rate mechanism differently in the financial crisis and may 'sooner or later' consider an exit plan from those measures, he added.
Wider acceptance of the yuan could accelerate the integration of Asian economies, Shen Minggao, Citigroup chief economist for greater China, was quoted by Bernama news agency as saying in Kuala Lumpur on Saturday.
'We expect a de-peg (of the yuan) to happen in the first quarter of this year but due to rising political tensions pertaining to the United States, we expect the appreciation process (only) by the middle of the year,' Mr Shen said.
The yuan, which is hovering at 6.83 to the dollar currently, is forecast to appreciate to 6.62 by the end of the year and 6.55 by March next year, the Bernama report added.
IMF managing director Dominique Strauss-Kahn raised the question in a recent policy speech as to whether a new global reserve asset is needed.
'Having several suppliers of reserve assets would limit the extent to which the international monetary system as a whole depends on the policies and conditions of a single, albeit dominant, country,' he said.
'One day,' he added, the IMF 'might even be called upon to provide a globally issued reserve asset, similar to - but in important respects different from - the SDR.'
China may want slot for yuan in IMF currency basket
Move will have important implications for yuan's liberalisation
By ANTHONY ROWLEY
IN TOKYO
IN A move that could further undercut Japan's role as Asia's number one economic and financial power, China is seeking to have its currency included in the basket that makes up the International Monetary Fund's special reserve currency, according to reports.
Power play: For the yuan to be included in the IMF's Special Drawing Rights, China would have to liberalise its capital transactions, says Sankei Shimbun
The reports, published in Japan's Sankei Shimbun newspaper at the weekend, quoted currency authorities in China and appear to have originated at a press conference given by People's Bank of China governor Zhou Xiaochuan during the National People's Congress in Beijing.
They come at a time when Chinese leaders are envisaging an expanded role for Special Drawing Rights or SDRs, which are the IMF's special reserve currency.
Moves to have the yuan form part of the SDR - which currently consist only of the US dollar, the euro, the pound and the yen - would have important implications for liberalisation of the Chinese currency and its currently pegged exchange rate.
The move would also support China's attempt to secure leading managerial positions - possibly including the managing directorship of the IMF - in the not too distant future.
As reported in The Business Times earlier, the IMF may be preparing to relinquish its custom of having only European managing directors, in favour of an Asian national. As the only Asian nation whose currency is part of the SDR, Japan is best placed to secure the slot but China may not be far behind.
'It will be important to promote quota and governance reform in the IMF,' the People's Bank of China said in a statement at the weekend in which it called also for China and other emerging economies to be given a greater say in management of the IMF.
China, which a year ago, sought eventual replacement of the US dollar as the world's main reserve currency with the SDR, is now aiming at yuan's inclusion in the SDR basket by 2015, Sankei Shimbun said.
The composition of the SDR basket is reviewed every five years and the last such review was in January 2006 with the next one being due towards the end of this year. At present the dollar accounts for 44 per cent of the SDR basket, the euro 34 per cent and the yen and sterling 11 per cent each.
For the yuan to be included, China would have to liberalise its capital transactions, the Sankei Shimbun report said.
Also, with its 'loose' monetary policies, the US might not agree to such a proposal unless China revalues the yuan against the dollar, the report added.
China will keep the yuan exchange rate 'basically stable' in 2010, Mr Zhou said at the weekend press briefing. China has managed the yuan exchange rate mechanism differently in the financial crisis and may 'sooner or later' consider an exit plan from those measures, he added.
Wider acceptance of the yuan could accelerate the integration of Asian economies, Shen Minggao, Citigroup chief economist for greater China, was quoted by Bernama news agency as saying in Kuala Lumpur on Saturday.
'We expect a de-peg (of the yuan) to happen in the first quarter of this year but due to rising political tensions pertaining to the United States, we expect the appreciation process (only) by the middle of the year,' Mr Shen said.
The yuan, which is hovering at 6.83 to the dollar currently, is forecast to appreciate to 6.62 by the end of the year and 6.55 by March next year, the Bernama report added.
IMF managing director Dominique Strauss-Kahn raised the question in a recent policy speech as to whether a new global reserve asset is needed.
'Having several suppliers of reserve assets would limit the extent to which the international monetary system as a whole depends on the policies and conditions of a single, albeit dominant, country,' he said.
'One day,' he added, the IMF 'might even be called upon to provide a globally issued reserve asset, similar to - but in important respects different from - the SDR.'