China’s yuan for SDR basket inclusion

  • IMF staff recommended that the currency be included in the IMF’s benchmark foreign exchange basket
  • Managing Director of the IMF Christine Lagarde also endorsed the yuan’s inclusion in the IMF’s Special Drawing Rights basket
  • A key focus of the Board review is whether the Chinese renminbi (RMB) also meets the other existing criterion, that the currency be ‘freely usable’.
  • ‘Freely usable’ is defined as being ‘widely used’ for international transactions and ‘widely traded’ in the principal foreign exchange markets. The yuan had failed to meet the ‘freely usable’ criterion the last time it was assessed, in 2010.
  • The final decision rests with the IMF’s Executive Board
  • The inclusion of the yuan in this basket has been endorsed by almost all of the major economies of the world, including Germany, Britain, France and Italy.
  • The U.S. was historically cautious about this, but recently softened its stance
  • The yuan’s inclusion in the SDR basket, when it happens, will be a great victory for China. It will mean a global economic coming of age for them, and will mean that the yuan is now a reserve currency for the world and all that entails
  • However, to meet the various requirements to achieve this, China has had to open up its closed capital account
  • Such a move of opening its capital account is ‘unambiguously a good thing’ for India.

Special drawing rights (SDR or XDR)

  • SDR are not a currency themselves, but are a certain number of rights given by the IMF to countries who, in a crisis, can draw upon any of the reserve currencies in the basket
  • They are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF).
  • The XDR was created in 1969 to supplement a shortfall of preferred foreign exchange reserve assets, namely gold and the U.S. dollar
  • Their value is based on a basket of key international currencies reviewed by IMF every five years
  • In 2010, the XDR basket consists of the following four currencies: U.S. dollars ($), euro (€), pounds sterling (£), and Japanese yen (¥)
  • The weights assigned to each currency in the XDR basket are adjusted to take into account their current prominence in terms of international trade and national foreign exchange reserves
  • XDRs are allocated to countries by the IMF. Private parties do not hold or use them.
  • The amount of XDRs in existence was around XDR 21.4 billion in August 2009.

Yuan inclusion in SDR to help BRICS

  • The IMF had announced that starting from October 2016, the RMB would be included in its Special Drawing Rights (SDR) basket.
  • Analysts say that the stability of the yuan will benefit the BRICS nations. This was because the NDB was considering raising capital in Yuan-denominated bonds as a first step before it entered the bond markets of the rest of the members of BRICS grouping.
  • The NDB was approaching the BRICS bond markets so that a financial mechanism could be evolved, which would gradually reduce dependence on financial markets of developed economies and their hard currencies.
  • The World Bank and the Asian Development Bank raised funds by issuing bonds in the financial markets of the U.S., European
  • The NDB was anticipating a close relationship, for raising capital, with the Multilateral Development Banks and domestic development institutions, such as the BNDES of Brazil, VEB of Russia, and EXIM bank of India, the China Development Bank, and DBSA of South Africa.
  • The NDB has an authorised capital of 100 billion dollars, and a 50-billion-dollar initial subscribed capital, which is equally shared among the founding members. Its lending will focus on infrastructure development and sustainable projects in the emerging economies and the Global South.
Related Posts
30th ಜುಲೈ 2018 ಕನ್ನಡ ಪ್ರಚಲಿತ ವಿದ್ಯಮಾನ
ಝುಗಮಗಿಸುತ್ತಿದೆ ನಮ್ಮ ಕರ್ನಾಟಕ! ಸುದ್ಧಿಯಲ್ಲಿ ಏಕಿದೆ? ದೇಶದಲ್ಲೇ ಅತಿಹೆಚ್ಚು ನವೀಕರಿಸಬಹುದಾದ ವಿದ್ಯುತ್ ಉತ್ಪಾದಿಸುವ ರಾಜ್ಯ ಎಂಬ ಹೆಗ್ಗಳಿಕೆಗೆ ಕರ್ನಾಟಕ ಪಾತ್ರವಾಗಿದೆ. ಕಳೆದ ಒಂದು ವರ್ಷದಲ್ಲಿ 3 ಗಿಗಾ ವಾಟ್ ನವೀಕರಿಸಬಹುದಾದ ವಿದ್ಯುತ್ ಉತ್ಪಾದಿಸುವ ಮೂಲಕ ತಮಿಳುನಾಡನ್ನು ಹಿಂದಿಕ್ಕಿದೆ. ಯುರೋಪಿಯನ್ ರಾಷ್ಟ್ರಗಳಾದ ಹಾಲೆಂಡ್ ಹಾಗೂ ಡೆನ್ಮಾರ್ಕ್​ನ ಒಟ್ಟಾರೆ ...
READ MORE
Karnataka Current Affairs – KAS / KPSC Exams – 18th April 2017
Biometric attendance to weed out bogus billing Civic officials are all set to introduce the biometric system of attendance for pourakarmikas to weed out suspect bogus billing by contractors. The National Informatics ...
READ MORE
12 acres of Kappatagudda forest destroyed in fire
The fire that broke out in the Kappatagudda foothills between Bidnal and Virapapur Lambani tandas on 3rd March night, has been completely doused. Fire and Emergency Services personnel, police, Forest department ...
READ MORE
Oxycontin pills. oxycodone hydrochloride. prescription only pain medication.  (Photo by Lawrence K. Ho/Los Angeles Times via Getty Images)
In order to ensure that there is no shortage of drugs in State-run health centres and that procurement is directly proportionate to requirement, the Department of Health and Family Welfare ...
READ MORE
Visvesvaraya Technological University (VTU) will train construction workers workingin its poat graduate campus. They will be trained in six basic skills related to their work by the varsity, which has been ...
READ MORE
Rural Development-Rural Roads InfrastructurePradhana Manthri Gram Sadak Yojana
Pradhana Manthri Gram Sadak yojana (PMGSY) PMGSY was launched in the State during December 2000 with the objective of providing rural connectivity through all weather roads to the habitations having a population of 500 and above. Under ...
READ MORE
Karnataka Current Affairs – KAS/KPSC Exams – 3rd November 2018
Forest Dept.’s Vision 2030 document runs into trouble with activists The process to map a long-term vision for the Forest Department is running into trouble with many environmentalists and groups opposing ...
READ MORE
Integrated farming
Integrated Farming (IF) is a whole farm management system which aims to deliver more sustainable agriculture. It can be applied to any farming system around the world. It involves attention to ...
READ MORE
The Karnataka Agriculture Prices Commission (KAPC) submitted its much awaited report, prescribing scientifically calculated “cost of cultivation” for 17 major crops. In the report by KAPC, headed by agricultural economist T.N. ...
READ MORE
Apple may start manufacturing in Bengaluru
The Government of Karnataka today said it welcomes Apple Inc.'s proposal to commence initial manufacturing operations in the city. "Apple’s intentions to manufacture in Bengaluru will foster cutting edge technology eco ...
READ MORE
30th ಜುಲೈ 2018 ಕನ್ನಡ ಪ್ರಚಲಿತ ವಿದ್ಯಮಾನ
Karnataka Current Affairs – KAS / KPSC Exams
12 acres of Kappatagudda forest destroyed in fire
New Software to Track Supply – Demand of
VTU to train construction workers
Rural Development-Rural Roads InfrastructurePradhana Manthri Gram Sadak Yojana
Karnataka Current Affairs – KAS/KPSC Exams – 3rd
Integrated farming
KAPC report on cost of cultivation
Apple may start manufacturing in Bengaluru

Leave a Reply

Your email address will not be published. Required fields are marked *