Photo taken on Nov. 30, 2015 shows a woman walking past the headquarters of the International Monetary Fund (IMF) in Washington D.C., the United States. (Photo: Xinhua/Bao Dandan)
In response to a string of operational shortcomings that the IMF evaluated this summer, the People's Bank of China, the country's central bank, announced an extensive reform measures package, including moves to further liberalize the exchange rate and interest rate regime, allow foreign investors to enter China's inter-bank market, and comply with IMF's more transparent statistical standard.
"China has taken enormous efforts to address those shortcomings and that dramatically increases the probability of yuan's inclusion," Lardy added.
Meg Lundsager, the former U.S. executive director at the IMF, told Xinhua that what is important is it shows the evolution of the system is possible, reflecting what China has undertaken over the past years.
"China is clearly on the path of reform. It wants to show yuan is widely traded and freely usable by the IMF definition," said Lundsager, now a senior researcher with the Wilson Center, a Washington-based think tank.
BETTERMENT OF GLOBAL MONETARY SYSTEM
At the Group of 20 summit held in Antalya of Turkey this month, Chinese President Xi Jinping said the inclusion of the yuan will help increase the representation and attraction of the SDR, improve the international monetary system and safeguard global financial stability.
Chang Jian, chief China economist of Barclays Capital, an investment bank, said the global demand for safe reserve assets is rising, but the U.S. dollar and the euro are getting harder and harder to supply adequate "safe havens."
"Only China is able to provide such safe reserve assets in order to ease the supply strains," she said.
The IMF is also facing challenges on all sides, as Europe has drawn the 188-member multilateral organization into the debt crisis from time to time and IMF's long-awaited quota and governance reform has been blocked by the U.S. Congress for years.
"The international system of economic governance is at a turning point," 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.
One solution for the IMF to reprise its role as a guardian of international financial stability could be adding the yuan into the SDR basket, they said.
Eswar Prasad, the former head of the IMF's China Division, said IMF wants to avoid another knock on its legitimacy, already tainted by the lack of progress on giving emerging markets their rightful voting shares.
"Excluding the yuan from the SDR could crystallize the concerns of policy makers in emerging markets that the IMF remains an institution run by and for the benefit of advanced economies," he noted.
"If the IMF is to remain relevant at a time of rapid economic transformation, it must adapt. By adding the Chinese renminbi and perhaps other emerging-market currencies -- to the SDR basket, it would demonstrate its willingness and ability to do just that," concluded Harold James, the professor from Princeton University, and Domenico Lombardi from the Centre for International Governance Innovation in Canada.
