Getting the yuan into the IMF’s SDR basket may finally come to pass at the end of November, but the global lender is considering changes to the basket, putting equal weighting for the currency up in the air. Meg Teckman reports.
The Chinese yuan is looking more and more likely to join the IMF's special drawing rights basket of currencies when the board votes on November 30th. IMF managing director Christine Lagarde recently gave it the thumbs-up. And even Japanese finance minister Taro Aso supported the move on Friday (November 20). (SOUNDBITE) (Japanese) JAPANESE FINANCE MINISTER, TARO ASO, SAYING: "It would not be a bad thing if the yuan is newly added to the international currencies in accordance with the rules." But sources told Reuters a possible reworking of the weightings for the basket could give it a smaller share than previously thought. Last calculated in 2010, the current basket is composed of the dollar, the euro, the pound, and the yen. And the IMF calculated back in July that the yuan could be added with a weighting of 14-16 percent under the current formula. But the Fund itself also acknowledged the formula has significant shortcomings as it holds trade volumes as more important than financial flows, which have increased greatly since the calculation method was introduced in 1978. With China as the world's largest exporter, the yuan's weighting would benefit from the current rules as they stand. But slower financial activity in the country would hold it back if transactions were to become more important. ENDS