Beijing, (Business News Report)|| The International Monetary Fund announced the lifting the weighting of the Chinese yuan in the basket of special drawing rights currencies.
With the yuan’s relative weight lifted, China’s central bank pledged to push for more open domestic financial markets.
The Chinese Bank said the IMF raised the weight of the yuan to 12.28% from 10.92% in the first periodic review of the value of the Special Drawing Rights since the Chinese currency was included in the currency basket in 2016.
The fund raised the relative weight of the US dollar to 43.38% from 41.73%, while reducing the relative weight of the euro, the Japanese yen and the British pound.
The statement added that the Chinese bank, along with other regulators, will continue to persistently encourage the opening of Chinese capital markets while further simplifying the process for foreign investors’ entry into Chinese markets.
The SDR is an international reserve asset that can be converted into five currencies.
The yuan’s inclusion in the SDR basket indicates that China’s currency became one of the five global reserve currencies in 2016 after years of efforts by the Chinese authorities to revitalize its use globally.
The change came amid a sharp depreciation of the yuan since late April, as it faces the double whammy of slowing economic growth due to COVID-19 lockdowns, and capital flight abroad due to the growing divergence in monetary policy with the United States.
The People’s Bank of China set the reference rate for the yuan at a higher level than expected last Friday, for the ninth consecutive day, stressing its support for the currency.
In its statement Sunday, the People’s Bank of China pledged to extend the time for interbank forex trading, make more types of assets available, and improve information disclosure in order to provide better investment terms for global institutions.
The classification of currencies did not change after the review, according to the International Monetary Fund statement issued late on Saturday, with the yuan remaining in third place among the basket of special drawing rights currencies, provided that the change in relative weights will take effect on the first of next August, and the next review will be conducted In 2027, according to the statement.
IMF Executive Directors agreed that neither the pandemic nor developments in financial technology have had any significant impact on the relative role of currencies in the SDR basket so far, according to the Chinese central bank statement.
The IMF said that the current review took place about a year later than it was scheduled in advance due to the spread of the Corona virus.