The International Monetary Fund announced Monday that the Chinese yuan will be added to its list of reserve currencies, a significant achievement that highlights Beijing's status as a global economic powerhouse.
The IMF said the yuan, also known as the renminbi, "met all existing criteria" and in October 2016, will be added to the Special Drawing Rights (SDR) basket of currencies the IMF uses as an international reserve asset, reported the BBC. Just four other countries hold the same designation - the U.S. dollar, euro, Japanese yen and British pound.
IMF chief Christine Lagarde said it marked "an important milestone in the integration of the Chinese economy into the global financial system."
"It is also a recognition of the progress that the Chinese authorities have made in the past years in reforming China's monetary and financial systems," she said, reported AFP.
Those reforms include making it easier for foreigners to access Chinese currency markets, more frequent debt issuance and expanding trading hours for the yuan, according to Reuters.
"The continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy," Lagarde said.
The yuan will be added on Oct. 1, 2016 and will have a 10.92 percent weighting in the basket, the IMF said. The dollar will have a 41.73 percent weighting, the euro will have 30.93 percent, the yen 8.33 percent and the British pound 8.09 percent. The dollar currently accounts for 41.9 percent of the SDR, the euro for 37.4 percent, the British pound 11.3 percent and the yen 9.4 percent, reports Bloomberg.
The SDR is an asset that functions almost like a currency. It is used for transactions between central banks and the IMF, and also as a currency mix that countries like Greece receive when the IMF provides financial aid, according to CNBC
