The weight of the high yuan as a global currency

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File photo taken on April 6, 2021 shows an exterior view of the International Monetary Fund (IMF) headquarters in Washington, DC, United States. [Photo/Xinhua]

The International Monetary Fund’s decision to increase the renminbi’s weight in a key global reserve asset marked the steady progress of the renminbi’s internationalization, reflecting the currency’s growing global weight and the realization of the financial openness of the China, industry experts said Sunday.

In the latest valuation review of the Special Drawing Right, an international reserve asset also known as the SDR, the IMF raised the renminbi’s weight in the basket of currencies that make up the SDR by 1.36 points. percentage to 12.28%, the People’s Bank of China, the country’s central bank, said Sunday.

The SDR valuation review, completed on Wednesday, marked the first review since the renminbi was included in the SDR basket in 2016, with a 10.92 percent share, the central bank said.

As of August 1, the increase in weight will see the renminbi continue to represent the third-largest share of the basket, behind only the US dollar and the euro, but ranking higher than the Japanese yen and the British pound.

“The increase in weight reflects the fact that the renminbi’s internationalization has made steady progress thanks to China’s growing weight in the global economic, trade and financial landscape,” said Zhang Xiaotao, dean of the School of Business. International and Economics from the Central University of Finance and Economics.

An IMF statement on Saturday said the updated SDR weights were based on developments in trade and financial markets from 2017 to 2021, with IMF executive directors acknowledging the progress made in China’s financial market reforms.

They called for additional efforts to further open and deepen the onshore renminbi market, and some also stressed the need for improved data transparency, the IMF said.

Reiterating China’s commitment to opening up financial markets, the PBOC pledged on Sunday to simplify procedures for foreign investors to invest in the Chinese market, expand the universe of investable assets, improve the disclosure of data and the business environment, and to extend the trading hours of the interbank foreign exchange market.

Zhang said more financial reform and opening-up measures would help accelerate the renminbi’s internationalization by facilitating the free flow of capital and cementing global investors’ preferences for renminbi-denominated assets.

He added that the renminbi’s recent depreciation against the dollar is due to short-term shocks, such as a resurgence in COVID-19 cases, and is unlikely to alter long-term development potential. of the country or derail the future internationalization of the renminbi.

Yang Haiping, general manager of the research development department of the Bank of Inner Mongolia, said the increase in weight will help strengthen foreign organizations’ willingness to hold renminbi and renminbi-denominated assets, boost confidence of the market in the currency and to cushion the pressure of a strong dollar on the renminbi.

Along with increasing the share of the SDR in the renminbi, the IMF increased the weighting of the dollar to 43.38%, up 1.65 percentage points from the last review in 2015.

(Web editor: Zhong Wenxing, Liang Jun)

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