EXOGEN: It now looks likely the yuan will be formally admitted to the IMF’s “special drawing rights” currency basket at the end of the month, which would mark a milestone in China’s efforts to become a global economic power.
Rabbit: $o when they say the RMB will be par with the USD does this mean China is going to RV first. $o RMB is 6.3 to USD so that translate into $6.30 by 11/30/15
EXOGEN: WHAT MANY INTEL PROVIDERS HAVE SEEMED TO MISS IS THE YUAN IS THE TRIGGER AND CATALYST FOR THE GLOBAL FINANCIAL SYSTEM ARCHITECTURE RESTRUCTURE
EXOGEN: READ THIS VERY CLOSELY
China on Saturday welcomed backing from IMF experts that the yuan should be included in its reserve currencies, saying the move would strengthen the world’s financial system.
China asked last year for the yuan to be added to the elite basket of SDR currencies, but until recently it was considered too tightly controlled to qualify.
It now looks likely the yuan will be formally admitted to the IMF’s “special drawing rights” currency basket at the end of the month, which would mark a milestone in China’s efforts to become a global economic power.
IMF chief Christine Lagarde said the fund now deemed the yuan “meets the requirements to be a ‘freely usable’ currency” — a key hurdle to joining the yen, dollar, pound and euro as a leading unit in international trade.
The yuan hit headlines in August when China’s central bank devalued the currency and said it would use a more market-oriented system to calculate the point around which the currency can trade each day.
The move sent markets into a tailspin as investors took it as a sign of slowing growth in China, a key driver of the world economy, but the central bank on Saturday said such reforms had taken it closer to joining the SDR basket.
IMF chief Christine Lagarde said the fund now deemed the yuan “meets the requirements to be a ‘freely usable’ currency”
“China thinks that the inclusion of the RMB (yuan) into the SDR basket will strengthen the representativeness and the attraction of the SDR (and) that it will improve the existing international monetary system,” the People’s Bank of China (PBoC) added.
“It will have win-win benefits both for China and the world.”
– Yuan’s rapid rise –
The yuan has rapidly grown in importance in recent years as China — the world’s top trading nation — has used it to settle more of its commerce, and made it directly convertable with more currencies.
Including the Chinese currency in the SDR would likely boost demand for yuan-denominated assets among central banks, and give it a sheen of respectability at a time when many investors are questioning Beijing’s ability to manage the slowing economy.
Now the world’s second-largest economy, China asked last year for the yuan to be added to the el …
Lagarde said IMF experts ruled Beijing had addressed “all remaining operational issues” required for SDR inclusion, which will be decided by the executive board at a November 30 meeting.
“I support the staff’s findings,” she said, adding to expectations that the board will also back the yuan.
That would mark an about turn from the beginning of August — before the yuan devaluation — when the Fund said the currency was not freely usable enough to be included in the basket.
Despite the recent misgivings, there has been strong pressure for the IMF to act now as the SDR basket is only reviewed every five years.
If a decision to include the yuan is made this month, the actual inclusion could take place as late as September 30, 2016, giving Beijing more time to prepare.
The recommendation Friday was broadly backed by the United States, China’s main rival for world economic supremacy.
“We intend to support the renminbi’s inclusion in the Special Drawing Rights basket provided the currency meets the International Monetary Fund’s existing criteria,” the Treasury Department said, using another name for the yuan.
“We will review the IMF’s paper in that light.”
EXOGEN: IMF chief Christine Lagarde said the fund now deemed the yuan “meets the requirements to be a ‘freely usable’ currency”
Submitted by Tyler Durden on 11/15/2015 08:53 -0500
While the world was following the tragic events unfolding on Friday night in France where hundreds of innocent civilians were killed or injured, an important economic development took place at the IMF, whose staff and head Christine Lagarde, officially greenlighted the acceptance of China’s currency – the Renminbi, or Yuan – into the IMF’s foreign exchange basket, also known as the Special Drawing Rights.
As Reuters summarizes, the recommendation paves the way for the Fund’s executive board, which has the final say, to place the yuan on a par with the U.S. dollar Japanese yen, British pound and euro at a meeting scheduled for November 30.
At this point only an explicit veto by US political interests deep behind the stage can derail the CNY’s ascension into the SDR. The United States, the Fund’s biggest shareholder, has said it would back the yuan’s inclusion if it met the IMF’s criteria, a U.S. Treasury spokesperson said, adding: “We will review the IMF’s paper in that light.”
If the yuan’s addition wins 70 percent or more of IMF board votes, it will be the first time the number of currencies in the SDR basket – which determines the composition of loans made to countries such as Greece – has been expanded.”
I would say that the likelihood of China’s yuan joining the IMF currency basket this year is very high,” said Hong Kong-based Shen Jianguang, chief economist at Mizuho Securities Asia.
“The only thing that could deter this is if the U.S. led a group rejecting the yuan’s inclusion, which could complicate things. But the United States’ current official stance doesn’t reflect such an attitude,” he said.
Unless something dramatically changes in the next three weeks, of course, although that seems unlikely: moments ago Bloomberg reported that Treasury Secretary Lew met with Chinese Vice Premier Wang Yang and Finance Minister Lou Jiwei on the sidelines of the G-20 Leaders Summit in Antalya, Turkey, according to readout sent via e-mail by U.S. Treasury, where “Secretary Lew reiterated that the United States intends to support the Renminbi’s inclusion in the Special Drawing Rights basket provided the currency meets the International Monetary Fund’s existing criteria.”
The executive board, which represents the Fund’s 188 members, is seen as unlikely to go against a staff recommendation and countries including France and Britain have already pledged their support for the change. This would take effect in October 2016, during China’s leadership of the Group of 20 bloc of advanced and emerging economies.
As Reuters further adds, joining the Special Drawing Rights (SDR) basket would be a victory for Beijing, which has campaigned hard for the move, and could increase demand for the yuan among reserve managers as well as marking a symbolic coming of age for the world’s second-largest economy. In an ironic twist,, while the IMF has historically delayed the moment of acceptance, it caved just months after China officially devalued its currency for the first time in decades to stimulate its exports, and has unleashed an unprecedented campaign (using overt and covert means) to stabilize the Yuan as capital outflows in the past several months have soared.
Reuters is likewise amused by this hypocrisy: “China’s heavy-handed intervention to stem a stock market rout over the summer, and an unexpected devaluation of the yuan in August, had raised some doubts about Beijing’s commitment to reforms.”
Unless, of course, the whole facade of “reform” is just an epic smokescreen and what the IMF is truly rewarding is gross market manipulation and currency warfare, such as what all developed nations have engaged in since the great financial crisis.
Singapore-based Commerzbank economist Zhou Hao said China needs to further accelerate domestic reforms and improve policy transparency. “The PBOC should reduce the frequency of market intervention, allowing market forces to really play a critical role.”
No matter what the real reasons behind the historic development,
IMF said its staff had found the yuan met the criteria of being “freely usable,” or widely used for international transactions and widely traded in major foreign exchange markets, Lagarde said. “I support the staff’s findings,” she said in a statement immediately welcomed by China’s central bank, which said it hoped the international community would also back the yuan’s inclusion.
Still, even if formally accepted, few if any reserve managers will rush out to buy Yuan: China’s extensive capital controls mean it would take a while before the yuan rivals the dollar’s dominant role in international trade and finance, analysts say.
Its closed capital account still limits foreigners from buying yuan-denominated assets and places caps on how much cash residents can take out of the country. These restrictions, along with concerns that the yuan is set to come under steady depreciation pressure, may cause corporates to back off from holding yuan.
Nonetheless, the People’s Bank of China said the IMF statement was an acknowledgment of the progress China had made in reforms and opening up its economy.
We suppose by that it means arresting stock shorters, prominent fund managers, doubling margin requirements at will, and crushing anyone who dares to sell the currency in the “open market.”
Putting aside this latest glaring example of globalist hypocrisy, here are the initial early responses by various Wall Street analysts.
SDR inclusion would encourage China to stick to much- needed financial and capital-account liberalization, Paul Mackel, HK-based head of global research, writes in note dated Nov. 14
USD/CNH moved above 6.4000 on Friday, which could suggest that more flexibility on yuan is coming
Market players will want to see more volatility in the currency eventually; hence, inclusion in SDR doesn’t necessary mean that the RMB will be stronger
China needs to show commitment to further opening up its capital account and accelerate domestic financial reforms, led by interest-rate liberalization, Zhou Hao, Singapore-based senior economist, writes in email
Country needs to improve policy transparency to attract global investors; that would build trust between global investors and Chinese authorities
PBOC should reduce frequency of intervention, allowing market forces to play a critical role
China stepped up rates liberalization in run-up to SDR inclusion; now it may increase pace of financial reform, Nie Wen, Shanghai-based economist, says in phone interview
Onshore-offshore yuan spread is expected to narrow in coming days
PBOC’s monetary policy stance will still be the most important element for investors to gauge regarding the yuan’s trading direction
A more market-oriented system is crucial for Chinese capital markets; a “reasonable” pricing of domestic assets will reduce systemic risk
Inclusion will largely be a symbolic move because slowing economy and capital-outflow pressures may delay FX reforms, Fiona Lim, senior FX analyst, says in phone interview
SDR inclusion will improve “rationality” in investment and assets allocation, which will improve financial stability
Any positive reaction on yuan’s possible inclusion in IMF reserves to be short-term, given that the outcome was well priced in, says Jason Daw, head of Asia currency strategy at Societe Generale SA in Singapore.
Being added to SDR unlikely to speed up the pace of reserve diversification into Chinese assets, Daw says in Nov. 14 e- mail interview
“We continue to see an upward bias to USD/CNY over the coming months and expect it to reach 6.80 by mid-2016.”
EXOGEN: China welcomes IMF backing to make yuan world reserve currency
EXOGEN: Making Sense of the SDR: