Yuan may have shot at getting global reserve currency status

For the first time, China has a real shot at getting the IMF to endorse the yuan as a global reserve currency alongside the US dollar and euro.

The International Monetary Fund will late next year conduct its twice-a-decade review of the basket of currencies its members can count towards their official reserves. Including the yuan in this so-called special drawing rights system would allow the IMF to recognise the ascent of the world's second-biggest economy while aiding China's attempts to diminish the dollar's dominance in global trade and finance.

China would need to satisfy the lender's economic benchmarks and get the support of most of the other 187 member countries.

China was expected to pass both tests, said Eswar Prasad, a professor of trade policy at Cornell University and senior fellow at the Brookings Institution.

"It will certainly help China's objective of making the [yuan] a more widely used currency," Prasad said.

Reserve-currency status for the yuan would make central banks, particularly those in developing economies, more eager to hold yuan assets and "diversify at the margin away from dollars", as well as euros, yen and Swiss francs, he said.

Approval hinges partly on whether the IMF reverses its 2010 decision that the yuan was not "freely usable".