CHINA LOBBIES TO GLOBALIZE RENMINBI
April 2, 2015
China is positioning the renminbi (RMB), its national currency, to become the world’s next reserve currency. While speaking with the International Monetary Fund (IMF) Managing Director Christine Lagarde, Chinese Premier Li Keqiang asked to include Chinese yuan in the IMF’s Special Drawing Rights (SDR) basket to become the fifth key international currency after the U.S. dollar, euro, British pound, and Japanese yen. Reuters reported Christine Lagarde confirmed that China’s yuan would be incorporated in the SDR currency basket at some point. Soon after, while meeting with the visiting U.S. Treasury Secretary Jack Lew in Beijing, Premier Li expressed China’s hope that the United States can approve reform to the IMF to give more sway to China.
According to Xinhua, negotiations regarding a list of banned practices under the U.S. – China bilateral investment treaty (BIT) are underway. The Chinese government will further open up the service and manufacturing industries by slashing the number of foreign investment limits by half. Since any changes that will come into effect in January 2016 require a 70% to 85% majority on the IMF council, Chinese Premier initiated a lobbying campaign to globalize the RMB. Mindful that the yuan’s inclusion could be seen as diminishing the dollar’s standing internationally, United States Secretary of the Treasury Jack Lew said the yuan is not ready for the prime time and needs regulatory easing before it will meet the IMF’s standards for inclusion in the SDR currency basket.
Given Germany, France, and others have supported China’s bid to be included in the basket, IMF Managing Director Christine Lagarde said the question is when, not if, the yuan qualifies. This is also concurrent to most major economies except for the United States and Japan r showing interest in signing the memorandum to join the China-led Asian Infrastructure Investment Bank (AIIB). To make the yuan a global reserve currency, in addition to reaching out to the United States for support to include yuan in the IMF, China is building a regional financial organization complementary to the U.S.-led IMF and World Bank.
The Chinese yuan is now the fifth-most used currency for payments, accounting for a record of 2.17% of global payments in 2015, surpassed only by the Japanese yen with 2.69%, the British pound with 7.92%, the euro with 28.3%, and the U.S. dollar at 44.6%, according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Will the Chinese yuan surpass the Japanese yen as the fourth-most used for payments soon after AIIB commences operations? The United States should reform its counterproductive policy of attempting to isolate the AIIB. Jack Lew said in San Francisco that the United States cannot afford to walk away from the rise of the RMB.
For more information on this topic, consult the following sources:
South China Morning Post – “China lobbies US to include yuan in IMF’s reserve assets”
Want China Times – “Beijing urges IMF to include renminbi in SDR”
凤凰网 – “国务院总理李克强会见美国财长雅各布卢”
凤凰网 – “汪洋会见美国财长 冀拓展两国共同利益”
央视网 – “李克强会见美国总统特别代表、财政部长”
中国金融信息网 – “人民币国际化简报”
Compiled and edited by Stella Ran Zheng