IMF approves China’s Yuan as elite reserve currency
International Monetary Fund (IMF) has included China’s Yuan into its elite reserve currency basket mailny used as an international reserve asset with an effect from effect from 1st October 2016.
Decision in this regard was taken by the IMF’s executive board meeting for regular five-yearly review of the basket of currencies that make up the Special Drawing Right (SDR) .
Yuan also known as the Renminbi will be the fifth freely usable currency along with the US Dollar, British Pound, Japanese Yen and Euro. It was added in the basket after it met all existing criteria for its inclusion.
Criteria for inclusion in elite reserve currency basket
- Export Criterion:Exports of a particular country must have the largest value over a 5 year period and should play a central role in the global economy.
- Freely Usable:The currency must also be a freely usable currency i.e. widely used in international transactions for making payments and widely traded in the main exchange markets.
About Chinese Currency
Renminbi which in Mandarin (China’s official language) means the people’s currency was officially introduced by the Communist Government of China led by Mao Zedong in 1949 after it came to power. Prior to Renminbi, Yuan was the official name of Chinese currency which means dollar-silver coin in Mandarin and was minted by the Spanish empire to trade with China for over 4 centuries.