IMF promotes global Yuan
The IMF's decision to add the yuan to a key global reserve asset marked a step forward in the currency's internationalization, which reflects China's financial opening-up and its growing global clout.
During the latest valuation review of the Special Drawing Right, also called the SDR, the IMF raised the weight of the Chinese yuan in the basket of currencies that comprise the SDR by 1.36 percentage points to 12.28 percent.
This was the first SDR valuation review since the yuan was added to the basket in 2016, with a share of 10.92 percent.
With the weight adjustment, the yuan will remain in the basket as the third largest currency behind only the US dollar and euro, but higher than both the Japanese yen and the British pound.
The weight increase reflects the yuan's steady progress towards internationalization thanks to China's strong presence in global trade, economics, and finance.
It was noted in the statement from the IMF on Saturday that the updated SDR weights were based on progress made in China's financial market reforms between 2017 and 2021.
The IMF reported that some officials called for further efforts to open and deepen the onshore yuan market, while others stressed the importance of enhanced data transparency.
As part of its commitment to opening up the Chinese financial market, the PBOC reiterated its promise on Sunday to simplify procedures for foreign investors to invest in the Chinese market, expand investable assets, improve data disclosure and the business environment, and extend trading hours of the interbank foreign exchange market.
By facilitating free capital flows and cementing global investors' preferences for yuan-denominated assets, more financial reforms and opening-up steps will help accelerate yuan internationalization.
The recent depreciation of the yuan is due to short-term shocks, such as the COVID-19 resurgence, and is unlikely to alter the country's long-term development prospects or delay its internationalization in the future.
The general manager of the Bank of Inner Mongolia expects the weight increase will help strengthen foreign organizations' willingness to hold yuan and yuan-denominated assets, strengthen market confidence in the currency, and ease the dollar pressure strong on the yuan.
In addition to raising the yuan's SDR share, the IMF increased the dollar weighting to 43.38 percent, an increase of 1.65 percentage points since the last review in 2015.