The yuan became the reserve currency of the IMF. Yuan is an international reserve currency
IMF included Chinese currency to the reserve cart. The share of the yuan in it will be 10.92%, which is more than the share of the British pound and the Japanese yen (8%). The US dollar will retain its primacy - almost 42%, while the euro is in second place with a share of almost 32%. What will be the impact of including the yuan in the SDR basket?
The yuan has finally earned a place in the basket of reserve currencies. It's like a membership card to a narrow circle of a select club, which until now included only the dollar, euro, British pound and Japanese yen. There is a lot of symbolism here - the role of China is emphasized, says Alexander Dushkin, asset manager of the International Private Investment Fund.
Alexander Dushkin, asset manager of the International Private Investment Fund
“If the yuan is included in this group, this indicates that China has symbolically reached a certain level. China as an economy matches in size. This can be expected to help China further reduce its borrowing costs. They are walking along a certain road, which will be long. By 2020, China promises that it will achieve full convertibility of its currency, and then it will be possible to say that its reserve status has truly been fully disclosed. On this moment The reserve value of the yuan is not tangible for many countries because access to government bonds and the debt market is difficult, preventing its reserve currency status from being fully realized.”
Transaction costs will gradually decrease for China, because the need for double currency conversion will disappear - the yuan will be convertible into many currencies. But this will not happen soon, and you should not expect an instant effect.
The special drawing rights, or SDR basket, which includes the yuan, is only important for the International Fund's operations, explains the head of operations at the monetary and foreign exchange market Metallinvestbank Sergei Romanchuk.
Sergey Romanchuk, head of operations on the money and foreign exchange market of Metallinvestbank
“The use of the SDR basket is somewhat limited and important for the operations of the International Monetary Fund. Use of the yuan by others central banks as a reserve currency is possible in the future, and the Bank of Russia also included the Chinese yuan in the list of currencies in which you can invest gold reserves(ZVR). However, as far as is known, no operations on physical purchase The Central Bank has not yet made yuan, and in the near future it is unlikely that there will be a significant share of gold and foreign exchange reserves in yuan.”
The yuan is still not a freely convertible currency, despite a fairly significant number of transactions in it. By regulation, it is divided into the domestic Chinese yuan and the Hong Kong yuan, which is mainly operated by international banks.
The flow of yuan between accounts is regulated by special legislation, which has undergone some tightening over the past few weeks. This was partly due to capital flight and the fall of the Chinese stock market- such an attempt to protect yourself from external international investors who bear their own risks for the economy. The inclusion of the yuan in the IMF reserve basket is an important event that China has been working towards for a long time, but it does not fundamentally change anything.
The International Monetary Fund (IMF) has officially confirmed that it is ready to include the Chinese yuan in its basket of reserve currencies (on their basis, the fund forms its own unit of account - the so-called special drawing rights).
This year, the yuan took fourth place in the ranking of the world's most commonly used currencies in international transactions, surpassing the Japanese yen for the first time in history.
In the material posted on the website zavtra.ru - comments by the Chairman of REOSH V.Yu. Katasonov and a number of other experts.
I don't really understand why it is fundamentally important for China to have the yuan as a reserve currency. After all, if China is going to compete with the American dollar, then this is a restructuring of not only the economic, but also the political system. In fact, Beijing must agree that the country will undergo deindustrialization, because reserve currency- this means that the country is sacrificing its real economy. This is clear to specialists, because the national currency cannot simultaneously service domestic economy and the world one, you can’t sit on two chairs.
I see only one reason for the Chinese - simply to increase their authority in the IMF. This authority will allow them to finally force the US to vote on the 2010 decision, which was made by the IMF board of directors. Then they voted for the 14th quota adjustment. The 14th quota adjustment provided for: a) increasing the share of China and many other countries on the periphery of world capitalism in the capital and votes of the IMF fund; b) provided for doubling the fund’s capital; c) provided for a discussion of the issue of revising the formula itself so that it more fairly and adequately reflects the role, specific gravity developing countries world economy and, accordingly, then their share in votes and in the capital of the IMF would increase. And for the past five years the United States has actually been blocking this decision. They are blocking it because they refuse to ratify the 14th quota adjustment.
It is clear that if the yuan acquires the status of a reserve currency, this is an additional argument in favor of increasing China’s share of both capital and votes. This is the only rational argument in favor of China's desire to gain status for its currency.
There is only one global reserve currency, it is called the dollar. The basket in question is the basket of currencies on the basis of which the so-called special drawing rights (or SDRs) are created, which is actually the monetary unit of the IMF. The inclusion of the yuan among these currencies (dollar, pound, yen, euro), firstly, will increase its international reputation. Secondly, it will contribute to the influx into it - there will be more purchases of the yuan, and accordingly, it will strengthen somewhat.
Of course, a large strengthening of the yuan could be bad for the Chinese economy. But I think Chinese National Bank will be able to counteract this trend, and the strengthening will not be particularly strong.
Introduction additional currencies in international payments - positively, because depending on one currency is a vice, the fruits of which we are now reaping.
Of course, for example, swaps are an alternative existing system international payments based on dollars and in general on the currencies of the so-called developed countries. But there are also disadvantages. An infinite number of swaps will be quite difficult to calculate: can you imagine what will happen if everyone leads in currency swaps your calculations. It can go completely crazy. What are the alternatives? The dollar is not suitable. Yuan is also a substitute for soap. The money that the IMF will issue is a clear creation of a world government, a global mafia that will simply swallow up the whole world.
What to do? We need to return to the idea of the International Clearing House, which was voiced back in 1944 by John Maynard Keynes. And it was precisely this that should have formed the basis of the Bretton Woods system, but then the United States profited from the war and introduced it as an international settlement currency dollar. What was the original proposal? The fact is that international clearing houses are being created, a gigantic accounting department that deals with the accounting of settlements between different countries. It was proposed to create an accounting unit, the so-called bankor, which could not be seized as an independent value. She didn't have physical appearance, just a note on the computer. The point is that by the end of some reporting period balances had to be reduced to zero. Suppose we supplied grain to Egypt, and Egypt supplied us with bananas in return. This means that the amounts are equal, the trade balances have leveled out. Everyone is happy and got their advantage. Level all trade balances so that no one starts trade and economic expansion. This is a form of harmonization economic relations and the virtual liquidation of the world's moneylenders. It’s clear why all this didn’t go away then. But now is the time to get back to it.
We, the Institute of High Communitarianism, have renewed the idea of an international clearing house. This is a fair form of world settlement, where no one receives advantages and everyone has equal opportunities. In order to equalize trade balances, it was assumed, including by Keynes, that one should not go beyond certain limits. And for exceeding debit or credit balances, that is, their foreign trade settlements, - corresponding penalties. And these incomes are withdrawn and go to the benefit of poor countries, helping them to level out their economies. Here the only advantage goes to the country that begins this process, because in strategy the one who sets the rules has the advantage, having the ability to change them. And the second point. In order to fulfill obligations, the banker is based on commodity content or guarantees in the form of contributions, for example, in precious metals. Let's say 10% of the amount of annual foreign trade settlements, which would be worth depositing in some kind of storage. Russia would be ideal as a storage facility as the center of the world, as a Eurasian power.
Announced the inclusion of Chinese national currency add to cart SDR (Special Drawing Rights) - an international means of payment issued by the IMF. Thus, the yuan joined the list of IMF reserve currencies, which also includes U.S. $, euro, pound sterling and yen, according to the organization's official press release.
"The Executive Council's decision to include the renminbi in the SDR basket is an important milestone in the process of integrating China's economy into the global financial system. It also recognizes the progress made by the Chinese authorities over the past years in reforming the monetary and financial systems. Continue and deepen this work will lead to the creation of a stronger international monetary financial system, which in turn will support China's growth and stability and global economy"said IMF Managing Director Christine Lagarde.
From now on, the cost of SDR will be based on weighted average cost currencies included in the basket of currencies consisting of the US dollar, euro, Chinese yuan, pound sterling and Japanese yen. The inclusion of the yuan will increase the attractiveness of the SDR by making the basket of currencies more diversified and more representative of the world's leading currencies, Lagarde said.
According to her, the interest rate on assets in SDR will also continue to be set as the weighted average interest rate on short-term financial instruments in the currency markets included in the SDR basket. The authorities responsible for all currencies represented in the SDR basket (which currently includes the Chinese authorities) are expected to maintain the fundamentals economic policy, which facilitate transactions by the IMF, its members, and other SDR users in these currencies.
It is noteworthy that on November 27, the Bank of Russia included the Chinese yuan in the list of currencies used for investing gold and foreign exchange reserves. However, the Central Bank has not yet carried out operations to physically purchase yuan. The Central Bank does not plan to carry out operations to purchase assets denominated in yuan in the near future, the TASS agency reported, citing two sources familiar with the situation.
Even then it was reported that, according to experts from the British bank Standard Chartered Plc, which is actively working in Hong Kong, since China has fulfilled all technical requirements, the probability of including the yuan in the SDR basket is 90%. If this happens, investments worth 4 trillion yuan ($628 billion) will flow into China in the next five years, Deutsche Bank AG predicts.
“The transfer of part of the gold and foreign exchange reserves into yuan, as well as the inclusion of the yuan in the IMF borrowing basket, will be a landmark event for the global economy,” stated Executive Director Heads Consulting Nikita Kulikov. - This will help China level out the decline stock indices, which occurred in mid-2015, and will strengthen its position."
The composition of the SDR basket, consisting mainly of the US dollar, euro, pound sterling and yen, determines currency structure loans to countries in need of fund assistance. IMF analysts estimate that the share of the yuan in the SDR basket could be approximately 14-16%.
In 2010, the IMF refused to include the yuan in the SDR, noting that the Chinese currency did not meet the definition of “freely usable.” This year, the yuan has become the dominant currency for cross-border settlements in the Asia-Pacific region involving China and Hong Kong, surpassing the yen to become the fourth most used global currency. True, the use of the yuan for investment remains minimal; it is primarily used in trade payments. At the end of this year, the IMF is due to complete its next review of the basket of reserve currencies on the basis of which the fund forms the SDR.
China has taken a number of steps in recent months aimed at liberalizing monetary systems s and interest rates, as well as the internationalization of the national currency, including the launch of a gradual lifting of restrictions on the movement of capital. All these measures, according to analysts, were aimed at strengthening the global role of the yuan and creating conditions for its inclusion in the basket of reserve currencies of the International Monetary Fund.
On October 1, 2016, an event occurred that does not often occur in the international monetary and financial sphere, but which, of course, can be classified as marking important structural shifts and having far-reaching long-term consequences. CNY officially included in the basket of key international currencies, on the basis of which the value of Special Drawing Rights (SDR) of the International Monetary Fund is calculated. The last time the composition of the basket changed was in 1999 due to the introduction of the euro.
In the new basket, the Chinese yuan squeezed out the yen and pound, but the weight of the euro decreased most noticeably (by almost 6.5%). At the same time, the share of the US dollar remained virtually unchanged. The weight of currencies in the SDR basket after the inclusion of the yuan was distributed as follows:
– US dollar – 41.73% (41.9% before including the yuan);
– euro – 30.93% (37.4%);
– Chinese yuan – 10.92%;
– Japanese yen – 8.33% (9.4%);
– British pound – 8.09% (11.3%).
De facto, this event means that the yuan is now on a par with the US dollar, euro, Japanese yen and British pound. At the same time, for the first time, a national currency is included in the IMF basket of reserve currencies. developed country, as it was before, but countries with emerging markets. In addition, the yuan is not yet a freely convertible currency. The Chinese authorities will strive to increase the convertibility of the yuan by 2020. According to other forecasts, the process of transition to full convertibility of the yuan may take 10-15 years.
According to IMF Managing Director C. Lagarde, the inclusion of the yuan in the basket of reserve currencies is of historical significance for the SDR, the IMF, China and the international monetary system. In China, the inclusion of the national currency in the SDR basket is regarded as an important turning point that will catalyze the growth of demand for the yuan throughout the world, and therefore will contribute to its further internationalization and the mission of improving the international monetary system.
The mere fact that the Chinese currency is included in the IMF basket does not automatically make the yuan a global reserve currency. However, this event reflects and reinforces the progress China has made in reforming its monetary, financial and exchange rate systems, and is a recognition of China's role and importance in the global economy.
The consequences of including the Chinese currency as a reserve currency will only fully manifest themselves in the long term and may turn out to be very large-scale and significant for the global monetary and financial system. In theory, the very fact of inclusion could contribute to the already ongoing process of expanding the international use of the yuan, removing a number of technical barriers along the way. However, in relation to the Chinese currency, expert opinions regarding possible consequences divided. Some believe that no major changes will occur in the short term, at least until China further liberalizes its financial sector and makes the yuan freely convertible. Others believe that demand for the Chinese currency and investments in the yuan will increase in the near future.
Today, the Chinese yuan is already part of official foreign exchange reserves: according to the IMF, 38 out of 130 central banks in the world have already included the yuan in their reserves. According to the latest IMF survey, the yuan's share of central banks' foreign exchange reserves was less than 1.1%, less than the shares of the Australian and Canadian dollars. The US dollar accounts for 63.4% of world reserves (with an open structure), the euro - 20.2%, the British pound and yen - less than 5%, and the Canadian and Australian dollars– slightly less than 2%.
The inclusion of the yuan in the IMF basket will help increase demand for the Chinese currency from central banks and other public investors (for example, sovereign wealth funds) in order to diversify their foreign currency holdings. According to some estimates, the share of the yuan in world reserves could increase to 5% by 2020 (over $375 billion), which would bypass reserves in the British pound and Japanese yen. Although the world's central banks are not obliged to repeat the structure of the IMF basket, if we assume that the increase in investments will be correlated with the share of the yuan in this basket (10.9%), then its share in world reserves may be greater and amount to about 800 billion dollars (or about half of the current assets of central banks in euros).
Following official government agencies, private institutional investors may also show interest in the yuan. An increase in their investments in yuan assets by only 1% could lead to an increase in demand for them by almost 200 billion dollars by 2020.
In general, according to the most conservative estimates, the expected growth in demand for assets denominated in Chinese currency by public and private investors by 2020 could be about 600 billion dollars, and according to more optimistic forecasts - up to 1 trillion. dollars
In order to simplify transactions with the yuan abroad, China last years is actively creating offshore clearing centers – the so-called. "yuan hubs" The clearing center allows non-residents to gain access to yuan and various financial instruments denominated in yuan, to make payments and settlements in yuan with Chinese companies and banks, including on a clearing basis. Currently, China already has over 20 foreign clearing centers around the world, including both nearby countries (South Korea, Thailand, Malaysia) and European countries (UK, Germany, France, Luxembourg), as well as Australia, Canada, Qatar, Chile. In September 2016, the New York branch of Bank of China became a clearing bank for yuan transactions in the United States, and Moscow ICBC Bank (a Russian subsidiary of the Chinese ICBC Bank) became a clearing bank for yuan transactions in Russia.
According to SWIFT, in the total volume of payments passing through this international system, share of the yuan in July-August current year amounted to 1.9%, which provided it with fifth position among the world's leading currencies after the dollar, euro, pound and yen. The gap with the yen in fourth place, which accounts for about 3.4% of settlements, is still large and it is difficult to predict when this gap will be overcome.
In August 2015, the yuan had already surpassed the Japanese yen and ranked fourth among the world's leading currencies with a record share of settlements of 2.79%. However, the subsequent devaluation of the yuan, along with the still high volatility of the Chinese currency and the slowdown in the growth rate of the Chinese economy, made the yuan a less popular unit of account. Of course, the share of the yuan in international payments is incomparably small compared to both the dollar (40-42% of payments) or the euro (30-31%), and China’s share in the world economy and trade. However, there is no denying the impressive growth in international use of the yuan in recent years. If at the beginning of 2013 it ranked 13th with a share of 0.63% of international payments, the yuan currently ranks fifth or sixth in this indicator. Based on the results of the first half of 2016, the yuan is the second currency of settlements in the Asia-Pacific region after the yen. At the same time, the gap between currencies is minimal.
According to data from the Bank of International Settlements (BIS), on the international foreign exchange market, the yuan is the most traded currency of countries with emerging markets. The average daily turnover of the yuan on the forex market in terms of dollars from April 2013 to April 2016 almost doubled - from 110 to 202.0 billion dollars. During this period, transactions with Chinese currency increased from 2.2% to 4% of the average daily turnover of the Forex market.
The trend of wider international use of the yuan that has emerged in recent years allows us to consider it as one of the most important for the world monetary financial market since the introduction of the euro. Consequently, it could not fail to find corresponding international recognition in the form of inclusion in the IMF basket. At the same time, the inclusion of the Chinese currency in the pool of reserve currencies imposes additional obligations on the PRC to increase transparency in terms of disclosing the structure of its foreign exchange reserves and gold reserves. In particular, China has so far only partially disclosed the structure of its reserves, but is expected to gradually increase transparency on this issue. In the same vein, it is worth considering the ongoing work between the BIS and relevant Chinese structures to improve the provision of statistics on banking system China.
The yuan is in fact at the initial stage of a long, complex and multifaceted process of moving towards the status of a full-fledged reserve currency, which includes numerous problems and risks, as well as recessions and recoveries. It is unlikely that we should expect a sharp change in demand for yuan in the near future, and China is not yet striving for this under the current conditions. Further liberalization of the capital market is difficult for the PRC due to the continued high risk of capital outflow, which could affect negative impact on the economy of the Celestial Empire, and through it on the entire world economy. It is fundamentally important for China to stabilize the situation on the currency and financial market, and this requires time. Currency strength and time are also required for investors to believe in the yuan's reliability. It can be assumed that, given the current trends in the near future, China will rather prefer to take a wait-and-see approach, focusing efforts on solving short-term problems, while reducing the pace of internationalization of the yuan.
The fact that the yuan is included in the IMF basket can be viewed from different angles. This is both a step towards further integration of China into the international monetary and financial system, and at the same time a certain message to Beijing, designed to convince it of the need for further steps towards the free convertibility of the yuan.
The composition of the IMF basket is now more diversified and comprehensively reflects current position world currencies and the state of the global economy, which will provide it with additional protection from exchange rate volatility and increase its importance for the global economy.
China confirms its intention to more actively participate in resolving issues on the global monetary and financial agenda and at the same time its readiness not to deviate from the path of reforms and further liberalization of the financial market. At the same time, the PRC understands that in the future the international community will evaluate financial reforms China for more high standards and in accordance with more high level international responsibility.
This is the fund's notional unit of account issued by the IMF in non-cash form. Its scope is limited to accounts within the IMF. SDR plays the role of additional liquidity necessary to regulate the balance of payments of the fund's member countries, to cover the deficit of their balance of payments, as well as as international reserves and to make payments on IMF loans. All these operations are carried out only at the interstate level or between the governments of countries and the IMF.
The basket of currencies of the International Monetary Fund was replenished on November 30 with the fifth monetary unit. The Chinese yuan joined the US dollar, euro, Japanese yen and British pound sterling. For the first time in financial history A currency that is not even freely convertible is recognized as a reserve currency.
China took a long time to achieve this. Corresponding calls from the country's leadership intensified in 2009, in the context of global financial crisis. China got through the crisis much easier than others largest economies world, maintaining fairly high growth rates. At the same time, China overtook Japan, becoming the second largest GDP by country world and the third largest currency area (after the United States and the eurozone).
At the same time, they raised the problem of revising quotas for individual countries in the IMF. By the end of the first decade of the 21st century, developing countries sharply increased their weight in the world economy and demanded for themselves more rights when making decisions in the main world financial institution. The foundation itself supported the idea and that’s it Required documents issued However, the matter stalled in the US Congress.
By accepting the yuan into the club of reserve currencies, the IMF compensated China for the delay in increasing quotas (it is China that looks like the most affected party in this story, since its contribution to world GDP much more than other developing countries). At the same time, if the decision on quotas seemed obvious, then with the basket of reserve currencies it is not so simple.
The yuan is still not a freely convertible currency in the classical sense of the word. Until recently, there were strict restrictions on the use of yuan abroad, and the exchange rate was very tightly controlled, although the country's financial authorities now allow it to fluctuate on the stock exchange. Beijing has established swap lines with the central banks of other countries, stimulating transactions in the relevant currencies. However, capital controls remain. According to plans published last month by the People's Bank of China, it is expected to be abolished only by 2020.
For China, its financial system and the yuan, not much will change at first. Inclusion in the reserve basket means the currency can be freely exchanged for the IMF's Special Drawing Rights (SDRs). There are not many goods and services denominated in SDRs in the world, and accordingly, the demand for the currency that companies need to hedge such transactions is relatively small. An exception can only be paid for the passage of ships through the Suez Canal, which is valued specifically in SDR. In general, one should not expect a sharp increase in capital inflows into yuan or assets after the IMF decision comes into force (this will happen in the fall of 2016).
Photo: Zhengyi Xie / Zumapress / Global Look
Rather, the situation is the opposite: in the near future the yuan will become somewhat cheaper. The main reason for this is the relatively weak economic statistics and a reduction in the country's balance of payments surplus. In addition, the rules for trading yuan have changed. Now National Bank China, as well as abroad, sets at the start of trading the price that was set by the last transaction previous day. This is what previously led the yuan to depreciate by 2 percent. Let's also not forget about the prospect of raising the US Federal Reserve's discount rate, which could cause an outflow of capital to America from other continents, and primarily from emerging markets.
Interestingly, China this time chose to spend several hundred billion dollars of its reserves rather than allow its currency to weaken too quickly. In the old days, he would have also helped her devaluate. Now everything is different. Firstly, Beijing is betting on a rise in domestic demand and a gradual shift away from the traditional model of an export economy, which the weak yuan is likely to hinder. Secondly, the United States is now looking extremely carefully at all the actions of the PRC with own currency. Washington will categorically not like a strong devaluation of the yuan. And they are definitely not going to figure out whether this is a natural or artificial devaluation.
Be that as it may, the People's Bank plans to gradually devaluate the yuan by another 3-5 percent over the course of the year. This will be enough not to weaken domestic demand, and it will not anger America. On the other hand, it will be possible to more or less follow market trends without burning through gold and foreign exchange reserves.
Long term prospects yuan are much more interesting and less predictable. Much depends on how China will use its currency in its own international trading operations. Share of the yuan in China's trade with outside world growing - from zero in 2010 to 25 percent in 2014. At the end of 2015, this figure is expected to increase to approximately 30 percent.
As the circulation of the yuan expands in trade deals China will also grow in demand for it in other transactions. Of course, full convertibility will be required. However, there is no doubt that the PRC will move in this direction. And taking into account the fact that Chinese economy in the next 10 years may reach a level of 20 percent of the world and equal to the American current exchange rate, the potential demand for Chinese currency is huge.
However, you need to understand that the dollar is popular not only because of the scale of the American real economy. The demand for it is ensured, among other things, by the huge size of the financial market and, accordingly, the liquidity that circulates on it. An investor can come to the USA at any time and choose any type valuable papers to your liking. In Europe this is somewhat more difficult, and in China it is even more difficult due to various restrictions. So it’s too early to say that the yuan will replace the dollar. But China’s entry into the elite club of the world’s great financial powers on November 30, 2015, certainly took place.
