Enhanced status of renminbi may lead to dominant role globally

03 Aug '22

2 min read

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Chinese officials and experts have said the enhanced status of the renminbi as a key global reserve asset will boost the currency's march toward playing a dominant role in the global financial governance system. More reforms and opening up of China's financial markets are, however, necessary for the renminbi to turn an unquestioned global currency, they said.

Beginning August 1, the International Monetary Fund (IMF) raised the weighting of the renminbi in the basket of currencies that make up the Special Drawing Rights (SDRs), an international reserve asset, by 1.36 percentage points to 12.28 per cent.

After the IMF’s decision, the renminbi continues to hold the third-largest overall share within the SDR basket, behind the dollar and the euro.

The rise in weighting will help boost overseas holdings of renminbi-denominated assets and solidify market confidence in the currency, experts were quoted as saying by official Chinese media.

The renminbi retained its position as the fifth most active currency for global payments by value in June, with a share of 2.17 per cent, up from 2.15 per cent a month earlier, according to the Society for Worldwide Interbank Financial Telecommunication, or SWIFT.

The Bank for International Settlements said in June that it will develop a Renminbi Liquidity Arrangement, which will act as a yuan reserve pool, from which participating central banks can obtain renminbi liquidity when needed to deal with market volatility.

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