China RMB has been accepted as reserve currency,3 cheers for chairman mao!!

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An honorable member of the Coffee Shop Has Just Posted the Following:

Washington Had Little Choice On IMF Decision Over Chinese Currency

U.S. representatives at the International Monetary Fund and Congress itself had very little choice regarding the Chinese renmimbi (RMB) inclusion as new reserve currency. The IMF boarded agreed to make the yuan the newest addition to its currency basket, known as Special Drawing Rights (SDR). Had the U.S. played hard ball with China, it would have been forced to build alternative institutions, challenging the existing financial architecture of the old Bretton Woods system, says Scott Kennedy, director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies (CSIS) in Washington, D.C.

“China has spent most of the past 36 years integrating itself into the global economy and international economic institutions. (It) recently rolled out new initiatives, such as the Asian Infrastructure Investment Bank (AIIB) and the Belt & Road investment plan, that suggest China may be seeking to create alternative institutions to the existing global architecture,” Kennedy wrote on Tuesday, repeating what many have been saying in the U.S. media about China’s new development initiatives in Eurasia. “These fears are exaggerated, but including the RMB in the SDR basket is another way to further cement China’s interest in the Bretton Woods system. On the heels of the U.S. government expressing deep concerns about AIIB and deciding not to join, saying no on the SDR basket would have generated more momentum within China to create alternative institutions,” Kennedy said.

The IMF’s decision goes into effect next October. China’s currency weighting in the basket will be greater than the Japanese yen at a little under 11%. The yen accounts fro 8.3%. The U.S. dollar is still the largest weighting, with 41% and shrinking ever so slightly. The euro and pound make up the rest.


China’s currency accounts for roughly a quarter of the country’s trade, meaning the RMB is used to pay for transactions and not the dollar and euro. That number has been growing astronomically over the last five years. It is not difficult to see the day when the RMB accounts for half of China’s trade, meaning that its biggest trading partners — Europe, Japan, Brazil and the United States, will learn to use the renmimbi in trade settlement instead of the dollar.

This will also increase demand for the RMB in big emerging market central bank reserve systems, especially in Brazil. China is Brazil’s largest trading partner. Russia, too, will likely increase its weighting of SDRs in its reserves, along with outright holding of the Chinese currency. China bonds will also mature in the years ahead of the RMB becomes more market-driven, emerging market bond investors tell FORBES.


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