New | G7 agrees to have yuan in IMF’s major league
Finance chiefs from the Group of Seven leading industrialised nations agreed on Friday that including the yuan in the International Monetary Fund's currency basket is desirable, but a technical review must be completed first.
The inclusion of the yuan as part of the IMF's unit of account would mark another stage in China's rise as a global economic player, requiring the United States to accept a dilution of its power in international finance.
German Finance Minister Wolfgang Schaeuble, who hosted the G7 meeting in Dresden, said the finance chiefs discussed the possible inclusion of the yuan in the basket of currencies that makes up the IMF's special drawing rights.
The SDR is a virtual currency that defines the value of IMF reserves, used for lending to countries in financial difficulty.
"We were completely agreed that it is desirable in principle, that the technical conditions must be examined, but there are no politically divergent views on this," Schaeuble said.
The yuan is already the world's fifth most-used trade currency. Beijing has made strides this year in introducing the infrastructure needed to float it freely on global capital markets.
Japanese Finance Minister Taro Aso said he welcomed China's intention to reform the yuan and that progress on liberalising China's capital market should pave the way for the yuan to satisfy the IMF's criteria as global currency.
Including the yuan in the IMF basket would increase China's influence at the IMF - an institution Washington was instrumental in designing and through which it has projected "soft power" for the past 70 years.
China would be the first emerging-market currency to join the basket that comprises the US dollar, euro, yen and pound sterling. But Schaeuble played down the chances of China being given the approval this year.
"Whether the renminbi will be included in autumn already is a decision the IMF must make. It seems a bit optimistic to me," Schaeuble said. "There is still a series of technical questions to be clarified and not just technical questions."
The onshore yuan strengthened to a one-week high of 6.1985 to the dollar on Friday with traders saying a correction in the Chinese stock market and a recovery in the euro had hurt the dollar. But the dollar was trading at a 13-year high against the yen on Friday.
For the whole of May, the onshore yuan traded in a stable range between 6.193 and 6.21 to the dollar and closed at a level stronger than the end of April's 6.2018.
