China’s obsession with IMF’s accounting unit and forging new global financial order reaches new heights
Beijing is reviving efforts to broaden use of Special Drawing Rights to achieve longstanding strategic aim of dethroning US dollar in international monetary system
It is just one line in a foreign exchange document, but it signals a renewed seriousness.
Last week, China’s central bank started publishing the nation’s foreign exchange reserves as measured by the International Monetary Fund’s accounting unit, Special Drawing Rights.
The People’s Bank of China is also studying the feasibility of issuing SDR bonds in China.
SDR can be a stabilising power in the international monetary system If we act now, if we take measures now, we can lay the solid foundations for tangible future progress
The SDR, a weighted average of various currencies, was created half a century ago as an alternative medium to the US dollar for governments and central banks to use to hold international reserves, but it never really gained momentum.
Now, with six months to go until the yuan is included in the IMF’s basket of currencies – alongside the US dollar, the euro, the British pound and the yen – China is reviving the earlier attempts.
Beijing‘s renewed passion for the awkwardly phrased reserve asset is all part of its strategic goal – led by the central bank’s veteran governor Zhou Xiaochuan – to end the US dollar’s hegemony; the world’s second-largest economy wants to forge a new global financial order.
“China is embarking, pragmatically but steadily, on a drive to enshrine a multicurrency reserve system at the heart of the world’s financial order,” said David Marsh, managing director and co-founder of Official Monetary and Financial Institutions Forum, a London-based dialogue and research agency. “The SDR ... is for Beijing, a useful stepping stone on this long journey.”