WASHINGTON China will need to keep improving the transparency of its exchange rate regime once its yuan achieves reserve status as part of the International Monetary Fund's currency basket on Oct. 1, IMF officials said on Wednesday.
The designation will make the yuan a "freely usable currency" in the eyes of the IMF, available for loans to IMF members and for repayments.
The yuan, also known as the renminbi, will join the dollar, euro, yen and British pound in the "special drawing rights" basket that forms the IMF's unit of account. Relative amounts of these currencies will be fixed for five years on Sept. 30 to achieve weightings determined last year.
"Inclusion of the Chinese renminbi in the SDR basket is an important milestone in the process of China's global financial integration. It recognises and reinforces China's continuing reform efforts," said Siddarth Tiwari, director of the IMF's Strategy, Policy and Review Department.
The yuan will enter the basket at a weighting of 10.92 percent, the dollar will stay relatively unchanged at 41.73 percent, while the euro, yen and pound will all receive lower weightings..
Tiwari said that going forward, the IMF expects that Chinese authorities will improve the reporting of its reserves composition, achieving full coverage within two to three years. They are also expected to work with the Bank for International Settlements to improve the quality of their reporting of Chinese banking sector statistics.
Tiwari also said that the reserve currency status implied by the SDR inclusion comes with the responsibility for Beijing to maintain a coherent and coordinated communications strategy regarding its monetary policy.
"These are responsibilities that come with being a reserve currency," Tiwari said.
(Reporting by David Lawder; Editing by Chizu Nomiyama)