China’s crusade to see the yuan added to the International Monetary Fund’s (IMF) benchmark currency basket may finally be gaining momentum, following a recent report that discussions between the country and IMF will likely decide the currency’s membership next month.
China had previously made several concerted attempts at pushing the yuan or renminbi’s (RMB) adoption on the IMF’s benchmark currency basket – a feeling the country has made apparent during several IMF meetings over the past few months. China argued that a plethora of recent reforms had closed the qualification gap needed for outright induction on the currency basket.
“Some of the recent reforms are well-timed to support the RMB’s bid for inclusion in the IMF’s Special Drawing Right (SDR) basket,” noted Paul Mackel, HSBC’s Chief Strategist, in a recent statement on the discussions.
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The announcement comes just one week after EBS reported that the Chinese yuan had overtaken other widely traded currency pairs, whereby becoming its third most traded currency on the platform.
EBS Brokertec estimated that use of the yuan or renminbi had constituted a growth trajectory of approximately 50% YoY. The update is also commensurate with the recent announcement by SWIFT’s currency tracker, which had shown the yuan jump up to the number four slot in day-to-day payments on a global scale.
Amongst the biggest opponents towards the yuan’s adoption on the currency basket are the United States and the United Kingdom, having jointly focused on China’s repeated currency controls as a stymying force.
“Confidence in the RMB and, hence, voluntary reserve diversification flows into China could rise with the endorsement of SDR inclusion. But this process has already been taking place. RMB inclusion is likely to be neutral to positive, but the converse is very likely to be negative,” Mackel added.