News / Business

China’s yuan doesn’t qualify to join IMF: US

Wednesday, 01 April 2015 5:46 PM [ Last Update: Wednesday, 01 April 2015 5:45 PM ]

US Treasury chief Jack Lew (file photo)

The US treasury secretary says the yuan, China’s national currency, is not ready for the prime time and needs regulatory easing before qualifying to join the basket of reserve currencies of the International Monetary Fund (IMF).

Jack Lew urged China to loosen restrictions on the flow of capital and the setting of interest rates to ensure the yuan is increasingly used as an international currency.

China must implement the “necessary reforms” before it will meet the IMF’s standards for inclusion in the basket of currencies that determine the fund’s Special Drawing Rights (SDR), Lew said in a speech Tuesday in San Francisco.

This is while countries including Germany and France have supported China’s bid to be included in the basket, and IMF Managing Director Christine Lagarde has said the question is when, not if, the yuan qualifies.

In late 2015, the IMF will complete its next twice-a-decade review of the basket of currencies that set the value of the SDR, which its members can count toward their official reserves, Bloomberg reported.

“As we engage with China about the right approach to high standards for the international financial system, neither the United States nor China can afford to walk away from the institutions that make up the international economic architecture,” he said.

He spoke after a visit to Beijing this week to meet with top officials including Premier Li Keqiang and Vice Premier Wang Yang ahead of the US-China Strategic and Economic Dialogue, due in Washington later this year.

The IMF created the SDR in 1969 to support the Bretton Woods system of fixed exchange rates after supplies of gold and dollars proved inadequate. Owning SDRs gives countries a claim to the four currencies in the basket: the dollar, euro, yen and UK pound.

The currency of the world's second-largest economy is now the fifth most used for payments, according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

China's yuan has overtaken the Canadian dollar and the Australian dollar.

The yuan accounted for a record 2.17 percent of global payments in December, up from 1.59 percent in October. It was preceded by the Japanese yen with 2.69 percent, while the U.S. dollar topped the chart with 44.6 percent, followed by the euro and the British pound with 28.3 percent and 7.92 percent, respectively, SWIFT said.

GHN/GHN

Press TV’s website can also be accessed at the following alternate addresses:

www.presstv.co.uk