The International Monetary Fund has agreed to add the Chinese yuan to its currency reserves basket.
The decision — which marks another step in China's global emergence — came after the IMF evaluated China's role as an exporter and the yuan's role as a "freely usable" currency. IMF Managing Director Christine Lagarde noted the currency's inclusion is a "clear representation of the reforms" taking place in China.
The addition of the yuan, or renminbi, will take effect next October.
This move in and of itself is not of major importance for the Chinese currency from a technical perspective though it will add some support to the currency when the IMF begins to accumulate it for its SDR basket. More significant is that it is another signal that the Chinese currency is a major currency---and another currency that traders will consider as an alternative currency when the inevitable collapse of the US dollar begins.
The SDR basket currently includes the U.S. dollar, Euro, Japanese yen, and pound sterling.