International Monetary Fund (IMF) Managing Director Christine Lagarde speaks on launch of the new Special Drawing Right (SDR) basket including the Chinese currency, the renminbi (RMB) in Washington D.C., the United States, Sept. 30, 2016. IMF on Friday announced the launch of the new SDR basket including the Chinese RMB, saying it was "an important and historic milestone" for China, the IMF and the international monetary system. (Xinhua/Yin Bogu)
BEIJING, Oct. 1 (Xinhua) -- The inclusion of China's renminbi (RMB) in an elite currency basket -- a historic milestone for the country and the international monetary system -- will help create a more multipolar economic order and advance reforms of the international monetary system.
The International Monetary Fund's (IMF) officially adds the RMB to its new Special Drawing Rights (SDR) basket as a fifth currency, along with the dollar, the euro, the Japanese yen, and the British pound.
The decision to include the RMB in the SDR basket, as IMF Managing Director Christine Lagarde put it, is an "important milestone" in the integration of the Chinese economy into the global financial system and reflects the progress made in reforming China's monetary, foreign exchange and financial systems.
On the one hand, the inclusion of the RMB in the IMF's SDR basket will enhance the currency's international credibility, benefiting countries, enterprises and individuals.
On the other hand, the inclusion of the RMB -- the only emerging market currency -- in the "world reserve" will help the flawed international currency system monopolized by the dollar to advance toward a multipolar world, making it more stable, representative and contemporary.
Despite the bulky weights of the dollar and the euro that account for 41.73 percent and 30.93 percent in the SDR basket respectively, the RMB is given a weight of 10.92 percent followed by 8.33 percent of the yen and 8.09 percent of the pound.
Hailing the move, the People's Bank of China said the launch of the new SDR basket will strengthen the representativeness, stability and attraction of the SDR.
It is a natural trend in the development of the global financial and monetary system to recognize the RMB's global reserve status as the international use of the RMB has increased dramatically over the past years.
Research from the IMF showed that a total of 38 countries currently own assets in RMB. Today the RMB has become the second largest currency for trade financing, the fifth-largest for international payment and the seventh largest reserve currency in the world.
The latest report from the Bank for International Settlements said the share of the RMB's foreign exchange market turnover in global trade had nearly doubled in the past three years, and daily turnover had increased to 202 billion U.S. dollars from 120 billion U.S. dollars.
The internationalization of the RMB represents the strong need of a growing number of Chinese tourists traveling abroad and exercising their huge purchasing power, as well as global customers buying fairly-priced quality products from Chinese businesses via e-commerce platforms like Alibaba.
But a greater role comes with greater responsibility. China's central bank said Saturday that the country will continue to push financial reforms and market opening.
With the U.S. government criticized by many for adjusting its monetary policy based on its own needs while failing to consider the global impact of the dollar, the time has come for the RMB to offer IMF member countries a fresh choice for a global reserve, one that allows for better profitability, liquidity and security.