China has finally won the endorsement of the International Monetary Fund for its efforts to reform its economy and internationalise its currency, with inclusion of the yuan in the basket of currencies that underpin Special Drawing Rights for deserving nations. In an historic moment for the international financial system and a new world order, a still-emerging market economy is joining four developed nations – the US, Europe, Japan and the UK – as an issuer of one of the world’s major reserve currencies. Indeed, as a mark of China’s global economic clout, the yuan has been given the third biggest weighting in the SDR, still well behind the US dollar and the euro but ahead of the yen and the pound.

IMF managing director Christine Lagarde has rightly hailed the decision by the fund’s governing board as a milestone in the mainland’s integration into the global financial system.

While largely symbolic, inclusion in the SDR will strengthen the hand of China’s reformers in pressing on with liberalisation of markets and capital flows. This would make the yuan widely available as a reserve asset, and give Chinese savers access to global markets, paving the way for full convertibility sooner rather than later. It is welcome news to central banks and others holding large and increasing yuan deposits.