Washington, Nov. 30, 2015: Christine Lagarde, managing director of the IMF, announces that China’s currency is eligible to join the Special Drawing Rights (SDR) basket (source: dpa)

Yuan’s slow rise could mean trouble for Western economies

At the end of November, the International Monetary Fund (IMF) announced that from October 2016 the Chinese yuan will be part of the basket of currencies that defines the Special Drawing Right (SDR), the accounting unit the organisation uses to carry out financial operations. The immediate practical effects will be minor. Being part of a unit of account means all but nothing in terms of monetary policy. Yet, the symbolic significance of this decision is considerable and could lead to consequences that will change the very foundations of global finance – if China decides to take advantage of the opportunity.

The IMF’s SDR will now include the dollar, the euro, ...

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Professor Enrico Colombatto
The Chinese authorities have maintained some restrictions on capital movements, and have shown a marked propensity to intervene in order to nudge the renminbi’s exchange rate towards desired levels
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