SDR

The renminbi is unlikely to be added to the basket of currencies underlying the International Monetary Fund's Special Drawing Rights (SDR) facility until October 2016, even if the IMF Executive Board were to recommend inclusion when it announces the results of its review later this year, according to an IMF report on Tuesday night.

A positive outcome to this year's review by the International Monetary Fund (IMF) of the potential inclusion of the renminbi into its Special Drawing Rights (SDR) facility could give a boost to interest in the currency from sovereigns, supranationals and agencies (SSAs), say market participants. Meanwhile, the IMF review is progressing, with the multilateral busy gathering data on trading flows.

Reforms in China's foreign exchange system and capital account will see the renminbi take on a greater role in the global economy, leading to an "inevitable" inclusion of the currency in the Special Drawing Rights (SDR) basket of the International Monetary Fund (IMF), HSBC said in a July 20 report.

Banque de France (BdF) is working with the financial sector to ready the market for the China International Payment System (CIPS) launch later this year, and has told GlobalRMB that the progress of the RMB means that inclusion in the IMF's SDR basket is simply a matter of "when and how".

The transformation of China's bond markets is set to quicken its pace, judging by the first RMB internationalisation report from the People's Bank of China (PBoC), which was published on June 11. There will be a focus on the Panda bond market, while central banks and monetary authorities may have their access to the onshore interbank market eased.

China's currency is growing rapidly as a means of trade settlement, but its struggle for global acceptance has as much to do with market share as with perception, according to academics participating in a public seminar on China's financial future.

China's currency stands a chance this year of being admitted into the select club of those backing the International Monetary Fund's special drawing rights. But at the moment it is not certain that the RMB will be deemed to have made the grade. It should be.

The inclusion of the renminbi in the International Monetary Fund's Special Drawing Rights (SDR) currency basket in the next SDR review later this year is by no means a foregone conclusion. But much progress has been made, according to participants at the Offshore RMB conference organised by market body Asifma this week in Hong Kong.

China's pursuit of more global financial connectivity is a tricky balancing act. Reforms are flowing thick and fast, but the final objective can be hard to fathom. The internationalisation of its currency involves many checks and balances — and as Elliot Wilson writes, there is little consensus on how far, and how quickly, the country wants to move.

Central bank reserve managers see the renminbi’s stature as a reserve currency growing to 10% share of global reserves by 2025, according to a survey conducted by HSBC and Central Banking Publications, released on April 13.

The International Monetary Fund (IMF) could give the RMB a much needed credibility boost this year by including it in its special drawing rights (SDR) facility.