Q8: What are the implications of the inclusion of the RMB into the SDR basket for the SDR itself and for the IMF operations?
The inclusion of the RMB is the first major change to the SDR basket composition since 1980 when the basket size was reduced from 16 to 5 currencies (also, in 1999, the euro replaced the Deutsche mark and the French franc).
The RMB's inclusion will enhance the attractiveness of the SDR as an international reserve asset. It diversifies the basket and makes its composition more representative of the world's major currencies.
Operationally, the inclusion of the RMB into the SDR basket means that an RMB instrument will be included in the calculation of the SDR interest rate, along with changes to the procedures for exchange of currency between China and the Fund. It will also impact the conduct of future Fund transactions which can be carried out in RMB once the determination of the RMB as a freely usable currency becomes effective on Oct. 1, 2016.
Q9: How will the RMB's inclusion impact the global monetary system and the financial system in general?
Put into a broader context, the inclusion of the RMB in the SDR basket could be seen as an important milestone in the process of China's global financial integration. It also recognizes and reinforces China's continuing reform progress.
As this integration continues and further deepens, and is paralleled in other emerging market economies, it could bring about a more robust international monetary and financial system, which in turn would support the growth and stability of the global economy.
The RMB's inclusion will also enhance the attractiveness of the SDR as an international reserve asset, as it diversifies the basket and makes its composition more representative of the world's major currencies.
