Call for more capital account convertibility before yuan joins IMF’s SDR currency basket

A senior banker has shot down the notion of the yuan joining the International Monetary Fund’s basket of reserve currencies next year.

The regional head of Citi Treasury and Trade Solutions, Amol Gupte, speaking on Thursday during a panel discussion by some the world’s top experts on the internationalisation of the yuan, said mainland China’s capital account should be opened further before the yuan is added to the special drawing rights (SDR) basket of currencies.

“I’d like to see much more capital account convertibility before it becomes a reserve currency,” Gupte said on the panel at Sibos, a conference put on by SWIFT.

“Only when you can get out do you want to get in,” he said in reference to the ability to buy or sell the currency freely, a point crucial to decision making at central banks when buying reserve currencies.

The IMF will meet in November to vote on whether the yuan joins the basket next year, a step considered to be a major step in the internationalisation of the yuan. SDR currencies are widely bought by central banks as reserve currencies.

Even if the yuan joined the SDR basket, it was unlikely that would change the composition of central bank reserves, Gupte said.