Xinhua, Washington :
The International Monetary Fund (IMF) should include Chinese currency renminbi (RMB) into its special drawing rights (SDR) basket as it will help reform the international financial system to reflect the growing weight of major emerging market economies, experts said.
“The international system of economic governance is at a turning point,” and particularly the IMF “is facing challenges on all sides,” Harold James, professor of History and International Affairs at Princeton University, and Domenico Lombardi, director of the Global Economy Program at the Centre for International Governance Innovation in Canada, wrote in a recent article published on the Project Syndicate website, one of the world’s leading op-ed websites.
The U.S. Congress has blocked the IMF 2010 quota and governance reforms that would expand the role of emerging economies in the institution for years, and the “Europe has drawn the organization into its debt crisis” with Greece having already missed a payment on its IMF loans, the experts said, adding that the IMF also ” carries a stigma” in Asia because of its flawed response to the region’s financial crisis in the late 1990s.
“How can the IMF reprise its role as a guardian of international financial stability? One solution could be to adjust its international reserve asset, the Special Drawing Rights, by adding the Chinese renminbi to the basket of currencies that determines its value,” they said.
The SDR was created in the 1960s as an international reserve asset that IMF members can claim in times of need. Currently, there are only four currencies in the SDR basket, namely the U.S. dollar, the euro, the British pound and the Japanese yen.
In order to serve a stable reference unit at a time of increasing exchange-rate volatility, “the SDR basket would need to be more comprehensive, including the currencies of large emerging economies, beginning with China,” the experts said.
The IMF is conducting its five-year review of the SDR basket this year and will decide whether to include the RBM into its basket this fall. At the last SDR review in 2010, the RMB, or the yuan, met the export criterion, but was assessed as not meeting the “freely usable” criterion.
Taking stock of progress in the RMB’s international use in recent years, the experts believed that the RMB now meets the requirement of being “freely usable.”
The International Monetary Fund (IMF) should include Chinese currency renminbi (RMB) into its special drawing rights (SDR) basket as it will help reform the international financial system to reflect the growing weight of major emerging market economies, experts said.
“The international system of economic governance is at a turning point,” and particularly the IMF “is facing challenges on all sides,” Harold James, professor of History and International Affairs at Princeton University, and Domenico Lombardi, director of the Global Economy Program at the Centre for International Governance Innovation in Canada, wrote in a recent article published on the Project Syndicate website, one of the world’s leading op-ed websites.
The U.S. Congress has blocked the IMF 2010 quota and governance reforms that would expand the role of emerging economies in the institution for years, and the “Europe has drawn the organization into its debt crisis” with Greece having already missed a payment on its IMF loans, the experts said, adding that the IMF also ” carries a stigma” in Asia because of its flawed response to the region’s financial crisis in the late 1990s.
“How can the IMF reprise its role as a guardian of international financial stability? One solution could be to adjust its international reserve asset, the Special Drawing Rights, by adding the Chinese renminbi to the basket of currencies that determines its value,” they said.
The SDR was created in the 1960s as an international reserve asset that IMF members can claim in times of need. Currently, there are only four currencies in the SDR basket, namely the U.S. dollar, the euro, the British pound and the Japanese yen.
In order to serve a stable reference unit at a time of increasing exchange-rate volatility, “the SDR basket would need to be more comprehensive, including the currencies of large emerging economies, beginning with China,” the experts said.
The IMF is conducting its five-year review of the SDR basket this year and will decide whether to include the RBM into its basket this fall. At the last SDR review in 2010, the RMB, or the yuan, met the export criterion, but was assessed as not meeting the “freely usable” criterion.
Taking stock of progress in the RMB’s international use in recent years, the experts believed that the RMB now meets the requirement of being “freely usable.”
