There is no stopping China from its bid to have its currency — the renminbi or yuan – from joining the IMF’s elite currency reserve club composed of the dollar, the yen, the sterling and the euro.
The Chinese central bank – the PBOC – will likely adopt more steps including allowing foreign issuers to offer local-currency bonds in the country as part of an effort to win the IMF’s approval, according to the Wall Street Journal, citing a PBOC report.
An IMF team will be in China this week to evaluate the yuan’s suitability to be part of the basket of currencies that make up the Special Drawing Rights or SDRs, the WSJ said.
China is also planning to let foreign central banks and other institutional investors to invest in its bond market, the report said.
Since it made public its desire to have the yuan be a part of the SDRs earlier this year, the government has taken a number of steps to open its capital market. They include raising the limit on the interest rates that banks should pay depositors (and there are speculations the ceiling would be lifted soon), adopting the IMF’s standard in computing balance of payments, opening more clearing centers for the yuan abroad and other measures to promote the wider use of the currency overseas.
“The SDR entry would give China a greater say in the international monetary system,” WSJ quoted a Chinese central-bank official as saying. “No question. We’re making real efforts to make it happen.”
China’s efforts to promote the wider use of the yuan outside of the country are gaining traction. According to SWIFT (Society for Worldwide Interbank Financial Telecommunications), the yuan was the most used currency in Asia Pacific for payments to China and Hong Kong in April.
Photo credit: Jason Wesley Upton via Flickr