Yuan's inclusion highlights China's achievements
China on Tuesday welcomed the International Monetary Fund's (IMF) decision to include the yuan, the country's currency, into its benchmark basket of reserve currencies, and vowed to push forward financial reforms and further open up its market.
The People's Bank of China (PBC), China's central bank, said in a statement that the yuan's inclusion in the IMF's Special Drawing Rights (SDR) shows the international community's recognition of China's achievements in economic development and reform and opening up.
"Including the yuan in the SDR will help boost the composition and attractiveness of the SDR and improve the current international currency system," the PBC said, adding the decision will benefit both China and the world.
The central bank also vowed to boost financial reforms and further open up.
"China will speed up financial reforms and opening up to make positive contributions to global economic growth, protecting global financial stability and improving global economic governance," the PBC said.
The IMF announced Monday that its Executive Board had approved a staff proposal to add the yuan as the fifth currency in the SDR, which currently consists of the US dollar, the euro, the British pound and the Japanese yen.
The decision will take effect on October 1, 2016.
The yuan will have a weight of 10.92 percent, the yen 8.3 percent, the pound 8.1 percent, the euro 30.9 percent and the dollar, the strongest, at 41.7 percent, the IMF said.
More stable currency
Yi Gang, deputy governor of the PBC, told a briefing in Beijing on Tuesday that the inclusion will have a "limited impact" on China's monetary policy framework.
Huang Wei, director of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, said the inclusion won't prompt "significant changes" to China's monetary policies.
She told the Global Times Tuesday that while the inclusion has "some impact" on reforms, SDR entry and China's basic currency policies are not directly connected.
Though the PBC will take a hands-off approach and let market forces play a larger role, it could still intervene should there be any "major fluctuation" in the exchange rate of the yuan, Yi said.
He noted that China is capable of keeping the yuan's exchange rate at a "reasonable" level and sees no basis for continued devaluation as China's economy still maintains a "medium-fast" growth pace, a surplus in commodity trading, and continuous growth of cross-border investments.
Lian Ping, chief economist of the Bank of Communications, also said in the short term, there will be fluctuations in the yuan's value, but it will be more stable without major appreciations or depreciations in the long run.
"The exchange rate of the yuan is based on many economic factors, including the overall economic growth and trade. The inclusion itself will not necessarily drive the yuan up or down," Lian told the Global Times on Tuesday.
According to the China Foreign Exchange Trading System, the central parity rate of the yuan weakened by 11 basis points to 6.3973 against the US dollar on Tuesday, the Xinhua News Agency reported.
China's central bank in August introduced a new method to determine the PBC's daily reference rate for the yuan, taking into consideration the previous day's closing price, the foreign exchange demand and supply, as well as changes in major exchange rates, Bloomberg reported.
The move resulted in a one-time yuan devaluation of 1.9 percent against the US dollar, the largest devaluation in two decades.
