Chinese yuan’s inclusion in SDR basket crucial for its globalization: economist

BUENOS AIRES – The Chinese yuan’s inclusion in the International Monetary Fund (IMF)’sSpecial Drawing Rights (SDR) basket from Oct 1 is crucial for the currency’s globalization,said an Argentine economist.

In an interview with Xinhua, Jorge Castro, director of the Institute of Strategic Planning inBuenos Aires said the yuan is the only currency in the SDR that comes from a developingnation and that its new status will help create a more multipolar economic order.

“The permanent inclusion of the yuan in the IMF’s basket of currencies is a step ofextraordinary importance for the yuan’s conversion into a global currency. This accelerates itsinternationalization and all signs indicate it will become a global currency in the next five or sixyears,” Castro said.

“Trade in our times is led by China, which will increase the use of the yuan in internationaltrade,” he continued.

The SDR is a basket of reserve currencies founded by the IMF in 1969 to supplement itsmembers’ official reserves and to allow them to exchange currencies in times of need.

“In 1990, the US GDP was around 22 percent of the global total, which is now under 15percent. China has become the second largest global economy…making US dollar and theChinese yuan two crucial global currencies,” said the economist.

For Castro, the IMF’s decision to include the yuan is due to China’s financial reform and theopenness of its market.

“The two things are linked. With the financial reform, China’s financial system is almostliberalized and its interest rates depend ever more on the market and less on the centralbank. This means China is becoming fully integrated with the global system and leadingglobalization efforts alongside the United States.”

Castro also said the IMF’s decision will impact Argentina as “China is Argentina’s main foreigninvestor. Furthermore, China accounts for over two-thirds of the country’s agriculturalexports.”

“Using the yuan as a global currency will accelerate the growth of Argentina’s agriculturalexports and will increase China’s direct investment in Argentina,” the expert added.