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Reuters

International Monetary Fund staff are set to give the all-clear for China’s yuan to be included in the lender’s benchmark currency basket, laying the groundwork for a favourable decision by policymakers, people familiar with the discussions said.
The IMF’s executive board is scheduled to decide in November on putting the yuan on a par with the dollar, yen, euro and pound sterling and a key factor will be its performance against a checklist of technical criteria, as assessed by IMF staff.
Three people briefed on the IMF discussions, who asked not to be named because of the sensitivity of the issue, said a draft report from staff reached a favourable conclusion on including the yuan, also known as the renminbi.
“Everything is on course technically and there is no obvious political obstacle. The report leans clearly towards including the RMB in the [basket] but leaves the decision for the board,” one of the officials said.
READ MORE: Yuan currency on track for inclusion in IMF's reserves basket'
A penciled-in early November date for staff to circulate their report to board members has been pushed back by several weeks, the source said.

Two other officials said staff would recommend the yuan join the basket, which determines the mix of currencies that countries like Greece receive as part of disbursements from the IMF.
“There is no real discussion, no obstacles, all seems on course,” a second official said.
Beijing is pushing for the yuan to join the Special Drawing Rights basket as part of its long-term strategic goal of reducing dependence on the dollar and to mark the country’s coming of age as an economic power.
An IMF spokesman said staff were finalising a report to be considered at a formal board meeting planned for November, although no date had yet been set.
“The decision on the possible inclusion of the RMB in the SDR basket will ultimately be made by the IMF’s executive board when the meeting is held,” he said.
The second official said that may be postponed until early 2016. Any change to the basket will take effect in October 2016.
China has rolled out a flurry of reforms recently to liberalise its markets and also help the yuan meet the criterion of being “freely usable”, or widely used to make international payments and traded on foreign exchange markets.
China’s central bank on Friday said it was freeing the interest rate market by scrapping a ceiling on deposit rates. 
READ MORE: Call for more capital account convertibility before yuan joins IMF’s SDR currency basket
The authorities have began weekly issuance of three-month Treasury bills and plan to extend yuan trading hours to overlap with Europe, all moves aimed at addressing IMF concerns, but also making it difficult to close out the checklist of technical criteria.
A positive staff review will cement a lower hurdle for board approval: a 70 per cent voting majority rather than the 85 per cent which is normally reserved for the IMF’s toughest decisions.
Experts said the political winds were blowing in Beijing’s favour.
France and the United Kingdom have backed the yuan’s inclusion and countries including Germany and Italy have said they are open to the move, depending on the technical criteria.
Eswar Prasad, a professor at Cornell University and former head of the IMF’s China Division, said he could not see the United States or Japan bucking a positive staff recommendation.
“I think it will be very difficult for the IMF, especially given all that China has done this year, to deny China the prize it really wants,” he said.
 


IMF staff ‘recommend China’s yuan be included in its international basket of currencies’

A draft report on the yuan's inclusion in the lender's currency basket is favourable, sources say, and policymakers may make a decision on the matter next month. Photo: Reuters

An IMF decision to add the yuan to its basket of currencies would put it on a par with the dollar and the yen and increase China's global financial clout, analysts say. Photo: AP

How will investors profit from IMF adding Chinese yuan to basket?

A stack of Chinese yuan notes is counted off in a bank as analysts brace for its possible addition into the IMF's SDR currency basket at a review later in the year. Photo: Reuters  

China seeks role for yuan in AIIB to extend currency’s global reach

Beijing will encourage the AIIB and the Silk Road Fund to set up special currency funds. Photo: AFP

The sources said China would push for broader use of the yuan at the AIIB and the Silk Road Fund, as part of efforts to promote the yuan as an international currency.

Renminbi's inclusion in IMF basket of reserve currencies can spark major reforms

Even if the yuan joins the basket, it won't make up more than about 10 per cent of the total valuation. Photo: Reuters

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