WASHINGTON (Reuters) - China’s economic reform plans, including opening up its capital account and deepening financial markets, should help Beijing meet the IMF’s criteria to join its Special Drawing Rights currency basket, the head of the IMF said on Thursday.
International Monetary Fund Managing Director Christine Lagarde earlier this year said it was a question of when, not if, China’s yuan will be included in the SDR basket - currently made up of dollars, yen, pounds and euros.
The IMF is due to review the basket’s composition later this year to assess whether any currencies meet its criteria, including being “freely usable,” or convertible - seen as a key obstacle for the yuan, also known as the renminbi.
“The Chinese authorities know quite well what is desirable, what needs to be changed and improved in the monetary policy and in the financial sector in China,” Lagarde said during a press conference on Thursday.
“And I believe what the Chinese authorities have actually indicated ... will naturally be conducive to an assessment of whether or not the RMB (renminbi) is freely usable, which is as you know one of the key criteria,” she said.
The first step in the IMF’s review of the basket for the SDR, an international reserve asset, is an informal board meeting in May, followed by a formal review in the autumn. Any changes would likely come into effect in January 2016, and can be passed by a simple majority.
The IMF could also decide to change its rules for inclusion into the SDR, but that would require a 70 to 85 percent majority on the 24-member executive board.
Though Beijing keeps a tight rein on the yuan’s movements and maintains strong capital controls, it is pushing for the increased use of the yuan for trade and investment as part of a long-term strategic goal to reduce dependence on the dollar.
Reporting by Anna Yukhananov; Additional reporting by Randall Palmer; Editing by Paul Simao