In its determination to ensure strong economic partnership with Chinese government, the International Monetary Fund, IMF, has 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 story obtained from New York Times stated that the IMF decision would 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 IMF 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 IMF 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 IMF decision, China took several actions to make sure that the renminbi was more widely embraced. China did so partly to meet the IMF’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 importantly, China began changing the way it sets the value of the renminbi each morning. In doing so, it abruptly devalued the currency.

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