Washington’s veto-power at the International Monetary Fund may not apply when the executive board decides later this year whether to include the yuan in the elite basket of currencies that comprise the IMF’s emergency lending reserves.
China’s bid to get its currency included in the IMF’s Strategic Drawing Rights, or SDR, has recently gained support from key U.S. allies as Beijing increasingly flexes its muscle in the global economy.
The inclusion of the yuan in the SDR doesn’t mean the yuan will rival the dollar anytime soon. But it could accelerate the liberalization of China’s long-closed financial markets and boost demand for the yuan by the world’s central banks. It would also be a key step in projecting China’s growing economic power in the international economy.
IMF officials already appear to be backing the move. Managing Director Christine Lagarde said in Beijing earlier this month it’s more a matter of when than if the yuan should be included. And at the fund’s spring meetings, she said the IMF needs to “better integrate fast growing emerging markets,” including as it reviews the SDR currency basket.
No surprise here. US dollar dominance is going to erode, which will mean a reversal of current dollar strength. No major government trusts the Empire. They are all looking at ways to dilute the power of the dollar. Inclusion of the yuan as part of the SDR basket is just one step in this direction
-RW
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