BEIJING: Britain weighed in on Tuesday to the debate on anointing the yuan as a major reserve currency, saying the issue was “very live” after Beijing asked the IMF to include the currency in its Special Drawing Rights (SDR) basket.

The yuan is the world’s fifth most-used currency in trade, and Beijing has made almost weekly strides this year in introducing the infrastructure needed to float it freely on global capital markets.

That has increased speculation that the yuan would join the dollar, yen, pound and euro in the SDR basket, which defines the value of the IMF’s reserve asset unit. Chinese state agency Xinhua said Premier Li Keqiang had asked the head of the International Monetary Fund, Christine Lagarde, to include the yuan.

“China will speed up the basic convertibility of yuan on the capital account and provide more facility for domestic individual cross-border investment and foreign institutional investment in China’s capital market,” Xinhua paraphrased Li as saying, in a report late on Monday.

Li added that “China hoped to, through the SDR, play an active role in the international cooperation to maintain financial stability and promote the further opening of China’s capital market and financial area,” the report said.

Lagarde said on Friday the yuan would at some point be incorporated in the SDR basket but whether this was the result of this year’s five-yearly review of the basket would depend on members’ views.

The United States, worried about China’s growing diplomatic clout, has been urging countries to think twice about joining the Chinese-led Asian Infrastructure Investment Bank, or AIIB, which some see as a challenge to the World Bank and the Manila-based Asian Development Bank.

Published in Dawn March 25th , 2015

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