China’s yuan joining IMF currency basket likely to increase nation's economic impact in Asia, says official

If China’s yuan joins the International Monetary Fund’s benchmark currency basket, changes in its economy will probably be felt more deeply in Asian financial markets, a senior IMF official said.

Changyong Rhee, director of the IMF’s Asia and Pacific Department, said estimated spillovers from China to other regional economies were already larger than expected and this could be exacerbated if the yuan, also known as the renminbi, joins the Special Drawing Rights basket.

The IMF’s executive board is due to decide in November on Beijing’s bid for the yuan to have equal billing with the dollar, euro, yen and pound sterling, and Rhee stressed he did not want to pre-judge that decision.

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If the currency is added, renminbi-denominated swap agreements that China has agreed with a host of trading partners could be regarded as official reserves and general usage of the currency within the region would likely increase, he said.

“It’s hard to know how fast it’s going to happen, but renminbi inclusion in the SDR basket can have an impact on Asian financial dynamics,” Rhee said at an event at the Carnegie Endowment for International Peace.