Yuan Into SDR

The U.S. wants the yuan to appreciate, but won't allow it in the SDR? The arguments made by the U.S. are constructive, they want China to liberalize more, but it isn't so much a reason to keep it out of the SDR as general good advice. If China doesn't liberalize and it opens the capital account enough to be in the SDR basket, it could end up being a conduit for capital flight out of China.

China knocking on door of IMF's major league, U.S. wavers

However the United States, where China's growing economic and political muscle is a source of strategic concern in Congress, is reluctant to add the yuan so soon to the basket of currencies that make up the IMF's Special Drawing Rights.

U.S. Treasury Secretary Jack Lew said after a visit to Beijing this week the yuan was not yet ready to join the virtual currency that defines the value of the IMF's reserves, used for lending to countries in financial difficulty.

"While further liberalization and reform are needed for the (yuan) to meet this standard, we encourage the process of completing these necessary reforms," Lew said in a speech in San Francisco on Tuesday.

...The IMF's board will hold an initial discussion in May on China's request and a full five-yearly review of the SDR's composition will be conducted later in the year ahead of a decision expected in November, IMF officials said.

"The German side supports China's goal to add the RMB to the SDR currency basket based on existing criteria," Joachim Nagel, a member of the executive board of the German central bank, said last weekend at a high-level forum in Boao, on the southern Chinese island of Hainan.

The upcoming review could be a good opportunity to introduce the yuan into the basket, he said, adding: "We appreciate China's recent development and progress towards liberalization."