This post was edited by SherrySongSHSF at 2015-12-2 08:32|
(From the Global Times)
The International Monetary Fund (IMF) decided on Monday to add the Chinese yuan to its Special Drawing Rights (SDR) basket. The yuan will have a 10.92 percent weighting in the basket, exceeding the Japanese yen and pound sterling. This inclusion is deemed as a milestone for the yuan's internalization and also a major breakthrough by the IMF. It carries both symbolic and realistic significance that the SDR basket now has five currencies, with the yuan becoming the first currency from an emerging country to be included.
The yuan's inclusion can help the IMF maintain its representation and authority in times when the global economy changes rapidly. After all, given China's sizable economy, any club that excludes China is incomplete. Seeking win-win cooperation with China is a realistic choice.
The addition will make important contributions to the international monetary system. This inclusion is also a political decision that shows what attitude developed countries hold toward the world's second-largest economy. It marks a victory for the Chinese economy and is recognition by the world's economic governance system of China's role.
With the latest move, the yuan's reputation in the international market will be immensely enhanced. The yuan may become the new reserve currency in many countries and eventually an international currency. This can lead to an increase in demand for the yuan in the middle- and long-term, which is beneficial for China.
The yuan's inclusion will also push China to forge ahead with financial reform. The internationalization of the yuan has to be continued, which will subject China to more implications from international financial turbulence. China needs to grow stronger to take the initiative in security.
The addition of the yuan is seen by some as a vote of confidence, and it encapsulates the economic achievements China has obtained.
China implemented some reform measures to comply with SDR standards, but generally the inclusion is an outcome of China's development.
If China continues to expand trade and increase its proportion of global trade, even the Trans-Pacific Partnership (TPP) will seek China's participation since otherwise the TPP can hardly qualify to be a multilateral trading system in the Asia-Pacific region.
This logic also applies to social and political sectors. As China achieves more, theories that fail to account for China's practices have to be modified.
Some observers feel uneasy about the possible risks derived from the inclusion. Yet China's reform and opening up has always been embedded with risks and they are well dealt with because China has made its every major move based on reality.
The yuan decision is a down-to-earth result and the risks it may entail will be controllable.