IMF Approves Yuan!

Back in late June of this year, I posted a sliver of a possibility of the IMF (International Monetary Fund) accepting the Yuan or Renminbi (RMB), China’s currency, as an world currency.  It has been approved! That means you can use RMB to buy stuff in other countries other than China, like you would use the U.S. Dollar to buy stuff in other countries other than the U.S.  Read more about it.

I copied and pasted the article from MSN which got it from the NY Times.

China’s Renminbi Is Approved as a Main World Currency

Inclusion of the renminbi in the I.M.F.’s elite reserve currency group was so important to China’s leaders that they named it in October as one of their highest economic policy priorities in the coming years.
© Agence France-Presse — Getty Images Inclusion of the renminbi in the I.M.F.’s elite reserve currency group was so important to China’s leaders that they named it in October as one of their highest economic policy priorities in the coming years.

By KEITH BRADSHER

HONG KONG — The International Monetary Fund on Monday approved the Chinese renminbi as one of the world’s main central bank reserve currencies, a major acknowledgement of the country’s rising financial and economic heft.

The I.M.F. decision will help pave the way for broader use of the renminbi in trade and finance, securing China’s standing as a global economic power. But it also introduces new uncertainty into China’s economy and financial system, as the country was forced to relax many currency controls to meet the I.M.F. requirements.

The changes could inject volatility into the Chinese economy, since large flows of money surge into the country and recede based on its prospects. This could make it difficult for China to maintain its record of strong, steady growth, especially at at a time when it economy is already slowing.

The I.M.F. will start including the renminbi in the fund’s unit of accounting, the so-called special drawing rights, at the end of September. Many central banks follow this benchmark in building their reserves, so countries could start holding more renminbi as a result. China will also gain more influence in international bailouts denominated in the fund’s accounting unit, like Greece’s debt deal.

China’s leadership has made it a priority to join this group of currencies, naming it in October as one of their highest economic policy priorities in the coming years. The renminbi’s new status “will improve the international monetary system and safeguard global financial stability,” President Xi Jinping of China said in mid November.

In the months before the I.M.F. decision, China took several actions to make sure that the renminbi was more widely embraced. China did so partly to meet the I.M.F.’s rule that a currency must be “freely usable” before it can be included in this benchmark.

China and Britain have sold renminbi-denominated sovereign bonds for the first time in London, which has emerged as Europe’s hub for the currency. Even Hungary has announced plans to issue its own renminbi-denominated bonds as well, while the Ceinex exchange in Frankfurt has begun trading funds this month based on renminbi bonds. Preparations began to trade renminbi-denominated oil contracts in Shanghai, where copper and aluminum contracts are already sold.

Most important, China began changing the way it sets the value of the renminbi each morning. In doing so, it abruptly devalued the currency.

The entry itself into the special drawing right is mainly symbolic. But such broader moves toward greater financial transparency and easier trading — part of the process to meet the I.M.F. requirements — will have long term effects on the renminbi’s usage.

“There’s this obsession with the S.D.R., and it’s completely out of proportion to its economic impact, which is likely to be trivial,” said Randall Kroszner, a former Federal Reserve Board governor who is now an economics professor at the University of Chicago. “It may be that in the drive to get into the S.D.R., they may make changes that make the renminbi more attractive for international market participants.”

http://www.msn.com/en-us/money/markets/chinas-renminbi-is-approved-as-a-main-world-currency/ar-AAfQoa5?ocid=ansmsnmoney11

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Leanne

I began writing Elle's Adventure in China (EACh) in June 2014 as a fun summer project, but as obstacles kept interfering with my plans, I forked and forked more options. I took writing this novel much more seriously in mid-July, and want to have it officially published someday in my lifetime. As many artists put their hearts into their projects, so do I. I did not start out liking to read, but a professor suggested a book for me for homework a few years ago, and it was an amazing book. Since then, I read for pleasure, and I hope my novel, Elle's Adventure in China, does the same for as many of you as possible. The same thing goes to writing. I did not like to write until I took a course where the professor and papers made me love to write. I hope every one of you find what makes you happy and dedicated to work. In May 2015, I started my other blog, Read and Write Here (R&WH), as a place to post other things that aren't China- and Chinese culture-related and not EACh. I share some of my memories and experiences from student teaching, irregular participation in Daily Prompts, etc. I'd like to have regular people and bloggers to write book reviews and post it on R&WH someday. Keep reading and writing!

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