IMF allows Chinese yuan to enter the jet set currency club

[webfact]

IMF allows Chinese yuan to enter the jet set currency club



NEW YORK: -- The IMF has accepted the Chinese yuan into the club of elite currencies.

It marks a turning point for China and its acceptance as a global economic power.

Managing director of the IMF is Christine Lagarde:“The addition and the inclusion of the renminbi in the SDR basket of currencies is a recognition of the significant reforms which have been conducted, of the significant opening up of the Chinese economy, of the financial, more market-driven principles that are being used by the Chinese authorities going forward.”

For Beijing this is about prestige and will allow China to challenge the economic dominance of the US.

The yuan joins the dollar, euro, pound and yen in the basket.

The IMF decision, which comes into effect towards the end of 2016, is largely political to be used as a tool to encourage economic changes within the world’s second largest economy.

It also allows closer scrutiny of the currency as the government begins a liberalisation of its tightly controlled exchange rate and financial system.


-- (c) Copyright Euronews 2015-12-01

[craigt3365]

Great news. Means more transparency in China's financial markets. Just noticed they also are asking developing nations to make sure they pay their debts! LOL

[OMGImInPattaya]

Will be interesting to see how this evolves...it's the only reserve currency with an authoritarian one-party state managing it. I don't think in the long term the Party will be willing to give up control of the economy that a truly world currency requires.

[catterwell]

A significant landmark in the beginning of the future methinks.

[OMGImInPattaya]

A significant landmark in the beginning of the future methinks.

You mean like the Euro was supposed to be...me thinks not.

[NCC1701A]

i guess when the commies said they would take over the world they meant it.

[craigt3365]

A significant landmark in the beginning of the future methinks.

You mean like the Euro was supposed to be...me thinks not.

A bit different here. Only one country that has a central bank. Right?

[Usernames]

Interesting, as is the chart that accompanies the article. European weighting is radically decreased, while the US remains the same.

The I.M.F. decision also says a lot about the waning influence of Europe: The renminbi is mainly replacing part of the euro’s role in the special drawing rights. Assessing currencies for the accounting system, the fund put a greater emphasis on their different roles in international finance. The dollar still dominates in finance and trade, while the renminbi is quickly gaining ground on the euro.

http://www.nytimes.com/2015/12/01/business/international/china-renminbi-reserve-currency.html?_r=0

[Publicus]

Took CCP 30 years of breakneck and budget busting sweat, swindle and smog to get tossed into this basket. Still, this is a day on the calendar but not much else.

If it all goes according to the IMF plan over the next 30 years, good. If it does not, good. Either way, the CCP in 30 years would not be the CCP it is today. Either way CCP will be radically different. If CCP is still there even 20 years out.

Everyone knew all year the yuan (rmb) was going into the SDR basket, effective October next year. The yuan got weighted at 10.9 which had been the real mystery and the actual well-kept secret. The Boyz are disappointed by this vital aspect of it.

CCP had wanted a weighting of 16% so the IMF coming in at 10.9% is a bit of a bust. It is in fact quite a whack. Markets had agreed anything less than 10% would have meant IMF was simply going through the motions to only acknowledge the size of the CCP economy, regardless of whether the data are real or "man made."

A weighting of 14% to 16% would have been the maximum IMF risk-taking end of the range. A weighting of 12% to 14% would have been a middling range IMF statement of confidence or trust in the Boyz. Ten to 12% is the more cautious and realist IMF weighting. Anything less than 10% would have been a laffer. So while CCP would have been fulfilled to get a 13% or 14% weighting, they're taking this with cheer.

The list of the next things the Boyz have to do keeps getting longer however.

USA never said it would use its veto while advising the Boyz they have to open their capital market. IMF also overlooked its rule that prohibits doing this with a government that does not have an independent central bank. IMF also pushed aside another rule that says the currency has to be fully convertible, which the yuan of course is not. There's another page full of specific items the Boyz must yet do, and before too much longer.

Let's just say CCP needs this now. Urgently. It will make available to them between $30 bn to $60 bn in hard cash from foreign banks and sources, which is what they need now even more than they needed it so badly back in January. We've seen what's happened over there throughout this year.

It's also a critically needed boost to economics reformers Xi Jinping and PM Li Kejiang in their ongoing battles against the hair on fire Maoists who oppose a consumer based domestically driven economy. Xi and Li needed this one. They really did.

[bangkapi]

Taking effect one month before a US presidential election. I'm noticing a pattern here.

[Srikcir]

The beginning of the end for Chinese currency autonomy and its two system currency manipulation.

Quite a success for other major world economies.

Maybe joining the world currency club will create a less nationalistic China.

[Harsh Jones]

Great news. Means more transparency in China's financial markets. Just noticed they also are asking developing nations to make sure they pay their debts! LOL

China is the largest net creditor in the world. Getting some terms mixed up it seems

[Harsh Jones]

A significant landmark in the beginning of the future methinks.

You mean like the Euro was supposed to be...me thinks not.

Nobody has ANY idea how much the Euro has helped the continent. Do you know how many more floors and floors of office space dedicated to Forex management companies would have all over Europe if they still had their own currencies ? That is just the beginning

[craigt3365]

Great news. Means more transparency in China's financial markets. Just noticed they also are asking developing nations to make sure they pay their debts! LOL

China is the largest net creditor in the world. Getting some terms mixed up it seems

Understood. But they are becoming seriously exposed in some dubious countries with perhaps an inability to pay back Chinese loans:

http://www.nytimes.com/2015/07/26/business/international/chinas-global-ambitions-with-loans-and-strings-attached.html

In many cases, China is going where the West is reluctant to tread, either for financial or political reasons — or both. After getting hit with Western sanctions over the Ukraine crisis, Russia, which is on the verge of a recession, deepened ties with China. The list of borrowers in Africa and the Middle East reads like a who’s who of troubled regimes and economies that may have trouble repaying Chinese loans, including Yemen, Syria, Sierra Leone and Zimbabwe.

With its elevated status, China is forcing countries to play by its financial rules, which can be onerous. Many developing countries, in exchange for loans, pay steep interest rates and give up the rights to their natural resources for years. China has a lock on close to 90 percent of Ecuador’s oil exports, which mostly goes to paying off its loans.

..............

China also has a shaky record when it comes to worker safety, environmental standards and corporate governance. While China’s surging investments have created jobs in many countries, development experts worry that Beijing is exporting its worst practices.

[Publicus]

Great news. Means more transparency in China's financial markets. Just noticed they also are asking developing nations to make sure they pay their debts! LOL

China is the largest net creditor in the world. Getting some terms mixed up it seems

This changes nothing globally.

CCP contribute next to nothing to global liquidity. CCP and their personal central bank the People's Bank of China can't possibly provide yuan to fuel the global markets.

Neither could the IMF basket of SDR currencies yuan will enter because SDRs are not designed to be an actual currency. One SDR = $1.37 but call on it and see what you get. You won't like it. Same for the other SDR basket currencies.

Africa is the only continent left over for the CCP to work over and CCP is giving them the business over there for sure. Africa is developing but too much of it is 'developing; in CCP ways which are unsustainable anywhere.

CCP vote share at IMF remains unchanged. IMF did this in the here and now because it is necessary to the global economy. One big country's big failure is too scary to think about.

[Publicus]

The beginning of the end for Chinese currency autonomy and its two system currency manipulation.

Quite a success for other major world economies.

Maybe joining the world currency club will create a less nationalistic China.

Two of three ain't bad.

Nationalism is however a CCP specialty cooked up as desired and suited to its own odd tastes. Garnishments are especially hot.