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The historic inclusion of China' s Renminbi into the Special Drawing Right (SDR) basket of the International Monetary Fund (IMF) has deeper significance for China and the global economy, said Zhang Tao, deputy managing director of the IMF, on Wednesday.
"The inclusion of the Renminbi thus recognizes a significant increase in the internationalization of the Chinese renminbi (RMB) in recent years, underpinned by policy reforms to achieve China's transition to an increasingly open and market-based economy," said Zhang Tao at a forum held by the Peterson Institute for International Economics and China Finance 40 Forum in Washington.
Last November, the IMF decided to include the RMB in the SDR basket as a fifth currency, effective Oct. 1, 2016. It's the first time for the IMF to include a currency from emerging market economy in its SDR basket.
It means that IMF members can use the RMB in the IMF-related transactions. "In essence, the renminbi becomes integral to a future crisis response," said Zhang.
According to Zhang, the inclusion of RMB in the SDR basket will make the currency more attractive as an international currency, contributing to greater risk diversification.
It will also strongly support China's continued efforts to reform its monetary, foreign exchange, and financial systems, and help facilitate its increased integration in the global financial community, said Zhang.
"In this regard, inclusion should help consolidate the process of renminbi internationalization," said Zhang, adding that the internationalization development could encourage fostering deeper and more liquidity financial markets.
International Monetary Fund (IMF) Managing Director Christine Lagarde speaks on launch of the new Special Drawing Right (SDR) basket including the Chinese currency, the renminbi (RMB). IMF on Friday announced the launch of the new SDR basket including the Chinese RMB, saying it was "an important and historic milestone" for China, the IMF and the international monetary system. Photo: Xinhua/Yin Bogu
IMF is working on the broader use of the SDR, including the issuance of SDR-denominated bonds and broader reporting in SDR terms, said the official, adding that the issuance of SDR-denominated bonds by the World Bank marked the first step for the developments.