Christine Lagarde of the International Monetary Fund has just put out a statement regarding the inclusion of the Chinese renminbi in the Special Drawing Right basket. Thanks to reader “cadwaladr” for catching this so fast and bringing it to our attention. This one statement validates almost two years of the POM analysis. When so many said it would never happen, and when so many said China would never have their currency join the SDR, this one moment in time, and the followup announcement on November 30th, will change the course of international reserve accumulation and separate the wheat from the chaff. Whether its a straight SDR inclusion, or an SDR2 type scenario, the monetary world is on the verge of a fundamental change. – JC
From the statement:
“The staff of the IMF has today issued a paper to the Executive Board on the quinquennial review of the SDR. A key focus of the Board review is whether the Chinese renminbi (RMB), which continues to meet the export criterion for inclusion in the SDR basket, also meets the other existing criterion, that the currency be “freely usable”, which is defined as being “widely used” for international transactions and “widely traded” in the principal foreign exchange markets.
“In the paper, IMF staff assesses that the RMB meets the requirements to be a “freely usable” currency and, accordingly, the staff proposes that the Executive Board determine the RMB to be freely usable and include it in the SDR basket as a fifth currency, along with the British pound, euro, Japanese yen, and the U.S. dollar. The staff also finds that the Chinese authorities have addressed all remaining operational issues identified in an initial staff analysis submitted to the Executive Board in July.
“I support the staff’s findings. The decision, of course, on whether the RMB should be included in the SDR basket rests with the IMF’s Executive Board. I will chair a meeting of the Board to consider the issue on November 30.”
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