{"id":16649,"date":"2015-06-12T16:47:08","date_gmt":"2015-06-12T21:47:08","guid":{"rendered":"http:\/\/news.medill.northwestern.edu\/chicago\/?p=16649"},"modified":"2015-06-12T16:47:08","modified_gmt":"2015-06-12T21:47:08","slug":"time-to-include-renminbi-in-sdr-basket","status":"publish","type":"post","link":"https:\/\/news.medill.northwestern.edu\/chicago\/time-to-include-renminbi-in-sdr-basket\/","title":{"rendered":"Time to include Renminbi in SDR basket?"},"content":{"rendered":"

By Yimian Wu<\/p>\n

Financial experts from Hong Kong said in Chicago Wednesday that November will be a good time to include the renminbi, or RMB, \u00a0the Chinese currency, in the International Monetary Fund\u2019s special drawing rights basket.<\/p>\n

The SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries\u2019 official reserves. The IMF reviews its SDR basket every five years and the next review will be in November.<\/p>\n

In its 2000 review, the IMF did not include the RMB in its SDR basket because it was not \u201cfreely usable.\u201d However, in a press release<\/a>\u00a0last March, IMF Managing Director Christine Lagarde said she was \u201cimpressed by the rapid internationalization of Renminbi in recent years\u201d and the IMF welcomes and shares the Chinese government\u2019s objective to have the RMB included in the SDR basket.<\/p>\n

<\/p>\n

At a McCormick Place event <\/a>to promote business in Hong Kong (which uses its own Hong Kong dollar, not the RMB), Benjamin Hung, regional CEO at Standard Chartered Bank, said there are around 60 central banks and sovereign wealth funds already invested in the RMB, with the aggregate amount exceeding $100 billion. \u201cIf it’s accepted to the SDR, that $100 billion will grow substantially,\u201d he said.<\/p>\n

Weber Lo, CEO of Citibank Hong Kong, said he thinks the RMB fits the IMF\u2019s two main criteria, the country\u2019s share of global exports and \u201cfreely usable currency.” He emphasized that \u201cfreely usable\u201d is \u201cnot exactly freely convertible.\u201d<\/p>\n

SDR currency is different from reserve currency, said Laura Cha, chairman \u00a0of the Financial Services Development Council in Hong Kong. She said SDR currency is the currency that goes into the basket that can be used for payment. But she said the day when the RMB will replace the U.S. dollar as the world’s reserve currency is \u201cquite far away.\u201d<\/p>\n

\u201cU.S. dollar will remain the preeminent reserve currency but that doesn\u2019t mean the world cannot have more reserve currency,\u201d said Hung. He said there is room for China\u2019s capital market to open up.<\/p>\n

Hung said its valuation will not change significantly if the RMB is accepted as a SDR currency. He said that outside China, the value \u00a0of the RMB is entirely determined by the market because of the huge volumes in the market.<\/p>\n

\u201cTo the extent that it is SDR-accepted, and to the extent that more people, more sovereign wealth funds and more central banks want to convert its currency to RMB, yes, there will be more buys,\u201d he said.<\/p>\n

The IMF announced in May \u00a0that the RMB is fairly valued, countering the prevalent criticism that the government keeps the currency undervalued.<\/p>\n

Cha said the RMB is now the fifth most used currency in the world. However, she said the share of RMB is \u201ca fraction\u201d of the U.S. dollar. \u201cU.S. dollar accounts for about 45 percent of the entire payment system in the global market and RMB ’til this stage is only 3 to 4 percent,\u201d she said.<\/p>\n

Currently, IMF\u2019s SDR basket comprises \u00a041.9 percent the U.S. dollar, 37.4 percent the euro, 11.3 percent the pound sterling and 9.4 percent the Japanese yen, according to the IMF.<\/p>\n

Photo at top: Laura Cha, chairman of Hong Kong’s Financial Services Development Council; Benjamin Hung, regional CEO at Standard Chartered Bank Hong Kong,; Weber Lo, Citi country officer at Citibank Hong Kong; and Ding Chen of Think Asia, Think Hong Kong. (Yimian Wu\/Medill)<\/div>\n","protected":false},"excerpt":{"rendered":"

By Yimian Wu Financial experts from Hong Kong said in Chicago Wednesday that November will be a good time to include the renminbi, or RMB, \u00a0the Chinese currency, in the International Monetary Fund\u2019s special drawing rights basket. The SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries\u2019 […]<\/p>\n","protected":false},"author":139,"featured_media":16650,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27,436],"tags":[],"class_list":["post-16649","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-spring-2015"],"yoast_head":"\nTime to include Renminbi in SDR basket? - Medill Reports Chicago<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/news.medill.northwestern.edu\/chicago\/time-to-include-renminbi-in-sdr-basket\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Time to include Renminbi in SDR basket? - Medill Reports Chicago\" \/>\n<meta property=\"og:description\" content=\"By Yimian Wu Financial experts from Hong Kong said in Chicago Wednesday that November will be a good time to include the renminbi, or RMB, \u00a0the Chinese currency, in the International Monetary Fund\u2019s special drawing rights basket. 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