China knocking on door of IMF's major league, U.S. wavers
By Paul Taylor
BRUSSELS (Reuters) - China is closer to joining the major league of reserve currencies with a deal possible later this year to include the yuan in the International Monetary Fund's unit of account, international finance officials say.
However the United States, where China's growing economic and political muscle is a source of strategic concern in Congress, is reluctant to add the yuan so soon to the basket of currencies that make up the IMF's Special Drawing Rights.
U.S. Treasury Secretary Jack Lew said after a visit to Beijing this week the yuan was not yet ready to join the virtual currency that defines the value of the IMF's reserves, used for lending to countries in financial difficulty.
"While further liberalization and reform are needed for the (yuan) to meet this standard, we encourage the process of completing these necessary reforms," Lew said in a speech in San Francisco on Tuesday.
The yuan, also known as the renminbi or RMB, is already the world's fifth most-used trade currency. Beijing has made strides this year in introducing the infrastructure needed to float it freely on global capital markets.
European members of the Group of Seven major industrialized economies - Germany, Britain, France and Italy - favor adding the yuan this year to the basket that comprises the dollar, the euro, the yen and the pound sterling. Japan, like the United States, is more cautious, the officials said.
The IMF's board will hold an initial discussion in May on China's request and a full five-yearly review of the SDR's composition will be conducted later in the year ahead of a decision expected in November, IMF officials said.
"The German side supports China's goal to add the RMB to the SDR currency basket based on existing criteria," Joachim Nagel, a member of the executive board of the German central bank, said last weekend at a high-level forum in Boao, on the southern Chinese island of Hainan. Continued...