IMF to study RMB's international use for next SDR basket review

[amoy]

IMF says to study RMB's international use for next SDR basket review later this year

WASHINGTON, March 12 (Xinhua) -- The board of International Monetary Fund (IMF) will reexamine the international use of yuan or Renminbi (RMB), the Chinese currency, when it reviews the currencies in the basket of the Special Drawing Rights (SDRs) later this year, the organization's spokesman Gerry Rice said Thursday.

Since the last review in 2010, "there have been a number of developments regarding the RMB's international use, and .. the upcoming review will take stock of these developments," Rice told reporters at a regular briefing. "That's something going to be happening toward the end of this year as I said."

Rice added that the IMF board essentially reviews currencies in the SDR basket every five years, with the next review to be scheduled for later this year, and the updates of the SDR basket will become effective in January 2016.

SDRs are international foreign exchange reserve assets. Allocated to nations by the IMF, an SDR represents a claim to foreign currencies for which it may be exchanged in times of need.

Although denominated in U.S. dollars, the nominal value of an SDR is derived from a basket of currencies, with a fixed amount of Japanese yen, U.S. dollars, British pounds and euros.

Rice noted that the selections of currencies for the SDR basket are based on two criteria -- the size of the country's exports and whether its currency is freely useable. In the IMF's last review in 2010, "the RMB met the export criteria, but was assessed to not meet the freely useable criteria," said the IMF spokesman.

Rice's remarks came hours after a senior Chinese central bank official said that the country is "actively communicating" with the IMF on the possibility of including RMB into the SDR basket.

"We hope the IMF can fully take into account the progress of RMB internationalization, to include RMB into the basket underlining the SDR in foreseeable, near future," said Yi Gang, vice governor of the People's Bank of China, in Beijing Thursday.

However, China will be patient until conditions are ripe, Yi said at a press conference on the sidelines of the country's ongoing annual parliamentary sessions held in the national capital, adding that views are divided on whether the RMB is a freely usable currency.

"No matter whether and when the RMB will be included in the SDR basket, China will push on with its financial sector reform and opening-up," Yi said.

The RMB became the world's No. 2 currency for trade finance globally in 2013, and overtook the Canadian and Australian dollars to enter the top five world payment currencies last year, according to global transaction services organization SWIFT.

RMB has also been used as a reserve currency in some other countries outside China and regions.

Renminbi enters Americas' tradings system as payment currency this week via Canada

STARTING this week, the renminbi (RMB) will step into Canada with the inauguration of the only RMB hub in the Americas, one more advance on its long march to internationalisation, writes Peter Hall, vice president and chief economist of Export Development Canada.

On the opportunities front, the benefits are equally apparent. By adopting the RMB as a payments currency, Canadian traders will have access to a wider universe of Chinese clients, and at the same time, improve their bottom lines.

This is because the vast majority of China's traders are SMEs, most of which do not have US dollar liquidity. As such, they need to rely on foreign exchange agents to access dollars, who in turn charge service fees and impose conversion ceilings. This creates bottlenecks and costs.

However, if payment was made in RMB, life would become a whole lot easier and cheaper for everyone involved - except, of course, the foreign exchange agent.

Finally, timing is also important, especially for our exporters. The RMB is expected to continue its fall against the US dollar during 2015. China's importers will be more receptive than ever to denomination of contracts in RMB.

It all began, with its first step into Hong Kong more than a decade ago. A long pause, and then a move into southeast Asia in 2013. Then Europe in 2014. In each of these locations, the RMB's arrival was both eagerly anticipated and ballyhooed.

We know in Canada it will be greeted with fanfare, but what is less certain is whether or not Canadian exporters and international investors will take action once the celebration ends. Should they?

It sure seems so. Consider the marvel of the RMB's rise. Simply put, we are watching history in the making. Within the span of the last five years, the RMB went from being virtually non-existent outside the People's Republic to the fifth most used payments currency in the world as of last autumn. And there is little doubt that before long it will overtake the Japanese yen and be fast on the heels of the pound.

 

[amoy]

Britain supports eventual RMB inclusion in IMF's SDR basket

Britain said on Friday it supports the eventual inclusion of the Chinese yuan in the International Monetary Fund's special drawing rights (SDR) basket of currencies.

George Osborne, Britain's Chancellor of the Exchequer, made the remarks during the spring meetings of the IMF and the World Bank.

Britain wants to involve and include important emerging powers in the world system, he said.

The internationalization of yuan, or renminbi (RMB), is not only meaningful to Beijing, but also of interest to London, which has been the global leader in the offshore RMB market.

Britain's interest was also on display when London applied to join the China-proposed Asian Infrastructure Investment Bank last month, opening the floodgates for Western countries to go on board.

Gold and RMB to join SDR?

Future of the SDR

Most likely this will change nevertheless. Both the IMF as well as China openly confirmed that the RMB will very likely join the basket when the new period starts. There are even rumors that gold could make a comeback into the basket of SDR currencies, which could positively impact how gold’s perception as ‘currency’. There are also speculations regarding the admittance of the Canadian dollar and the Swiss franc; also important currencies within the financial system. Below you can see a few scenarios for the SDR for 2016. In October the finalized composition will be published, which will then be implemented from January 1st, 2016. Especially for gold and the Chinese currency, exciting times are ahead!

 

[ezsasa]

Britain supports eventual RMB inclusion in IMF's SDR basket


Gold and RMB to join SDR?

Future of the SDR

I like the Gold part. Indian public have minimum 20000 tonnes of gold with them, roughly valued at 1.2 trillion USD.
But unfortunately public will not let go of their gold.

 

[Rowdy]

I like the Gold part. Indian public have minimum 20000 tonnes of gold with them, roughly valued at 1.2 trillion USD.
But unfortunately public will not let go of their gold.

China has won!! Once SDR inclusion it is game over and victory to china!

 

[amoy]

I like the Gold part. Indian public have minimum 20000 tonnes of gold with them, roughly valued at 1.2 trillion USD.
But unfortunately public will not let go of their gold.

Probably u're not aware >>>
China pushes to top as world's largest gold miners

 

[ezsasa]

Probably u're not aware >>>
China pushes to top as world's largest gold miners

Be it may, I don't have any issues with that.
My point is limited to the gold part.

 

[amoy]

Let China Join the Global Monetary Elite


Despite the shock some may feel, the unexpectedly high weighting of the RMB is no reason to either oppose or put off a decision. Tokyo and London may have their feelings hurt, but the U.S. dollar and euro will still be dominant under any scenario.

To be sure, there is no guarantee China will take the necessary and, in some cases, difficult steps to make the RMB “freely usable” between now and when the IMF votes on SDR inclusion. China hasloosened domestic deposit interest rates; started to regularly provide currency holdings information to the IMF; expanded access to its stock, bond, and futures markets; modestly reduced barriers to Chinese households to transfer RMB in and out of China; and, as we saw last week, unpegged the RMB from the U.S. dollar, which should result in the unification of the RMB exchange rate in and outside of China and facilitate hedging against the RMB’s value by international investors. While on the right path, China’s capital account still needs to be liberalized further in order for the RMB to be widely and easily exchanged globally, something China’s leadership recognizes.

Then again, we should not exaggerate what is needed to make the currency “freely usable.” Some suggest that admitting China into the SDR before it fully opens its capital account would mean watering down international standards simply to accommodate a rising China. But the IMF admitted the Japanese yen into the SDR basket in 1980, 12 years before Japan fully opened its capital account. The IMF guidelines and history show that “freely usable” is an ambiguous standard — the very trend toward greater openness of the capital account is itself important. On this score, the signs are pointing in the right direction for the RMB.

If China does what is needed to join the SDR basket, other countries should cheer. When the IMF Executive Board gets together in November, China will need 70 percent of the IMF’s vote, and the United States’ 17 percent voting share is not enough to block the change by itself. The United States would have to persuade several allies to join it, which could result in a showdown that would dwarf the ill-fated tussleover the China-led Asian Infrastructure Investment Bank in early 2015. There, the United States claimed that the AIIB fight was about China going outside existing international institutions to set up a new club that ran by its own rules. In the case of the SDR basket, China is trying to become a more central player in the heart of the existing international system, and it’s willing to pay a high price to do so. That is behavior that the United States should reinforce, not oppose.

If the United States were to oppose the RMB’s entry in the face of broad support, that would validate the charge that the United States is not worried about norms and standards, but simply about protecting its dominance in the face of rising power. The United States might win the short-term battle, but it would unintentionally encourage China to build an off-ramp from the global community and set up its own alternative institutions. All the SDR in the IMF isn’t worth protecting if it results in fragmentation of the global system.

https://foreignpolicy.com/2015/09/28/china-india-trade-modi-obama/



~~Still waters run deep. ~~from my MiPad using tapatalk

 

[Compersion]

Would love to have a study on how bad data from PRC is timed well to holidays and stock exchange closure and even military parades.

Kicking the can down the roads ? Passing the buck to get other to take the lead down ?

Earlier PRC shares supposed to join msci index but did not ... Smart Business leaders in hong Kong giving quotes of being exiled ... And reminding people of cultural revolution and bad times before.

 

[amoy]

China Completes SWIFT Alternative (CIPS)

Needless to say, China will be delighted to have its own unified payment system, one that will further internationalize the Renminbi which at least check had become one of the top five payment currencies in November 2014, overtaking both the Canadian and the Australian dollar based on SWIFT data.

Until now, cross-border yuan clearing has to be done either through one of the offshore yuan clearing banks in the likes of Hong Kong, Singapore and London, or else with the help of a correspondent bank in mainland China.

"Misunderstandings under the current clearing system happen from time-to-time due to different languages and codings. The CIPS is a breakthrough since it will offer a united platform and enhance efficiency," said Raymond Yeung, an analyst at ANZ in Hong Kong.

The launch of CIPS will enable companies outside China to clear yuan transactions with their Chinese counterparts directly, reducing the number of stages a payment has to go through.

It will also make it far more difficult for the NSA to track payments to and from the mainland when such compromised intermediaries as SWIFT are used.

This is how the Mercator Institute for China Studies previewed this major development:

The Chinese government is striving towards a controlled internationalization of China's currency through a step-by-step expansion of the use of the RMB in Chinese foreign trade and investment. Towards this end, a worldwide network of agreements dealing with central bank currency swaps, the direct exchange of the RMB with other currencies, and RMB clearing hubs has been built. The establishment of an independent payment system (CIPS) for RMB transactions and an alternative to the existing SWIFT would further increase China’s autonomy vis-à-vis U.S. centred financial market structures.

Finally, as it becomes easier to transact in non-USD terms, it will merely accelerate the adoption of the Chinese Yuan as the primary currency of global trade, or what little is left of it, as opposed to the currency of financial engineering.

Global yuan payments increased by 20.3 percent in value in December compared to a year earlier, while the growth for payments across all currencies was 14.9 percent for the same period, SWIFT said.

China has accelerated the pace of yuan internationalization in recent years. The central bank assigned 10 official yuan clearing banks last year, bringing the total number to 14 globally that can clear yuan transactions with China.

The final observation to make here is that if indeed it was the Obama administration's brilliant ploy to kick out Russia - and by geopolitical affiliation, China - out of a monetary transaction mechanism that is controlled and supervised by the US and force the two biggest challengers to US global dominance into their own (or joint) payment system, then well, congratulations: it succeeded.

 

[amoy]

Is This How China's Currency Will Make Its Mark on the World Stage?
London will become the first overseas market for renminbi-denominated Chinese sovereign debt.

The news that China would issue sovereign debt in London isn’t surprising. Reports late in September noted that the People’s Bank of China (PBOC) was set to begin issuing short-term renminbi-dominated debt in London. “I have strongly supported China’s efforts to increase the international use of the renminbi,” Osborne noted then, at the conclusion of the U.K.-China Economic and Financial Dialogue in Beijing.

The strategic logic of the deal makes sense given the current bilateral climate between David Cameron’s Tory government and China’s leadership. Britain has made no secret of its desire to attract Chinese investment. The current government in the U.K. has gone as far as to defy the warnings of the United States in approaching China, as encapsulated in the row that ensued after the U.K. signed up to China’s new Asian Infrastructure Investment Bank (AIIB) as a founding member despite U.S. protests about the bank’s questionable environmental and governance standards.

For China, this deal will mark a major milestone in the renminbi’s arrival as a major currency on the world stage. This will be the first time that renminbi-denominated Chinese sovereign debt will be available outside of Chinese borders, opening up an international renminbi debt market. Osborne, more so than any other Western treasury chief, has made a point of emphasizing his bullishness about the Chinese economy, despite this summer’s equity market tremors. “Britain and China — we will stick together,” he declared triumphantly in Beijing less than a month after China’s so-called “Black Monday.”

The development could help the incorporation of the renminbi into the International Monetary Fund’s Special Drawing Rights currency basket. The SDF basket currently includes the euro, the Japanese yen, the pound sterling, and the U.S. dollar. In August 2015, the IMF declared that it would delay its decision on the renminbi’s eligibility for SDR inclusion pending a determination of just how freely usable the currency is.

The renminbi is currently a managed float currency and controlled closely by the PBOC. Amid equity market volatility, the PBOC has repeatedly adjusted the value of the currency, initially pitching it as a “one-off depreciation.” Opening up an international market for renminbi-denominated sovereign debt could help balance worries that the renminbi is still too vulnerable to calculated political influence.

http://thediplomat.com/2015/10/is-this-how-chinas-currency-will-make-its-mark-on-the-world-stage/


~~Still waters run deep. ~~from my MiPad using tapatalk

 

[amoy]

International Monetary Fund approves reserve currency status for China's yuan

The inclusion of the yuan in the Special Drawing Rights basket - alongside the US dollar, euro, yen and British pound - could put it under pressure to weaken

UPDATED : Tuesday, 01 December, 2015, 10:43am


A bank clerk counts Chinese currency notes. Photo: AP

The International Monetary Fund has approved the inclusion of the yuan among its Special Drawing Rights currencies at a board meeting in Washington, a move analysts say will put the currency under pressure to weaken.

The yuan, also known as the renminbi, will join the US dollar, euro, Japanese yen and British pound in the basket of currencies the IMF uses as an international reserve asset.

The IMF said on Monday that the yuan “met all existing criteria” to be included as one of the currencies used for the global organisation’s SDR, which is used as the standard for dealing with its 188 member governments.

READ MORE: Six key things to know about the vote on China’s yuan joining the IMF basket of currencies
The Chinese currency will have a weight of 10.92 percent in the basket. It is lower than the dollar's 41.73 percent and 30.93 percent for the euro but above the Japanese yen's 8.33 percent and British pound's 8.09 percent. The addition will take effect on October 1, 2016.

Currently the weights of the dollar, euro, pound and yen are 41.9 percent, 37.4 percent, 11.3 percent and 9.4 percent respectively.

The move is seen as recognition of China's financial and economic progress after years of reform, though the authorities may take time to deliberate on how to further improve.

"SDR inclusion will be a recognition of how far China has come," said Jonathan Fenby, China managing director at research firm Trusted Sources. "But it remains a question whether China will continue to open up the capital account."

READ MORE: The rise of the renminbi: How adding China's yuan to IMF's SDR basket will spur the currency towards further reform
As its economy slowed, China would be reluctant to bring down capital flow barriers when "households are moving money out", said Fenby, a former editor of the South China Morning Post.

China has been making more changes to its financial system this year - it lifted controls on deposit and lending rates, opened up the interbank bond market to foreign central banks, tweaked the yuan exchange rate formation mechanism to give market forces greater play, and increased its frequency of releasing some of the country's financial data.

All these were done despite its weakening economy and rising financial risks with a clear target of getting the IMF to recognise the yuan as a stable currency.

While joining the SDR would boost foreign holdings of the yuan in the long run, the currency is now under pressure to weaken from a stronger US dollar and gloomy growth prospects.

The central bank also may not be able to intervene as easily in the foreign exchange market in future.

Banks such as Standard Chartered and Bank of America Merrill Lynch expect the yuan to weaken between 2 to 9 per cent next year. Researcher Zhang Ming, with the Chinese Academy of Social Sciences, said the yuan was overvalued and set to weaken. But he predicted "no big yuan fall immediately after the SDR inclusion".

China Merchants Bank analyst Liu Dongliang said the IMF decision would have "no direct relation" to the yuan's value. The currency's global profile would be decided by whether it was easy and cheap to use in payments, he said. "It means China has to open up domestic financial markets and accept international rules."

China would do so cautiously, Zhang said. "China has already [done so much] to get the SDR deal done. It would be unwise to open up while the risks are high."

 

[Compersion]

Good stuff also it looks good for PRC.

But why I reading it is "symbolic" only.

Like when did Japan have joined the imf sdr and when was their financial crisis crash ... Wish to read more and learn more ...

 

[amoy]

video S. Korea to issue Yuan-denominated FX bonds in China
http://english.cntv.cn/2015/11/30/VIDE1448872202818288.shtml

South Korea will issue Yuan-denominated foreign exchange stabilization bonds in China by the year end, according to Yonhap News Agency. The estimated amount would be about 600 billion Won, or 517 million US dollars. Analysts say the move would help local firms do business in China, as they could get the currency directly without going through third-parties.

~Tapa talks: Orange is the new black.~

 

[amoy]

China's yuan officially joins the SDR

WASHINGTON, Oct. 5 (Xinhua) -- The historic inclusion of China's Renminbi into the Special Drawing Right (SDR) basket of the International Monetary Fund (IMF) has deeper significance for China and the global economy, said Zhang Tao, deputy managing director of the IMF, on Wednesday.

"The inclusion of the Renminbi thus recognizes a significant increase in the internationalization of the Chinese renminbi (RMB) in recent years, underpinned by policy reforms to achieve China's transition to an increasingly open and market-based economy," said Zhang Tao at a forum held by the Peterson Institute for International Economics and China Finance 40 Forum in Washington.

Last November, the IMF decided to include the RMB in the SDR basket as a fifth currency, effective Oct. 1, 2016. It's the first time for the IMF to include a currency from emerging market economy in its SDR basket.

It means that IMF members can use the RMB in the IMF-related transactions. "In essence, the renminbi becomes integral to a future crisis response," said Zhang.

According to Zhang, the inclusion of RMB in the SDR basket will make the currency more attractive as an international currency, contributing to greater risk diversification.

It will also strongly support China's continued efforts to reform its monetary, foreign exchange, and financial systems, and help facilitate its increased integration in the global financial community, said Zhang.