Christine Lagarde, IMF leader, issued a press release today saying that she was recommending to the board that the Chinese currency (RMB) be added to the Special Drawing Rights (SDR) basket of currencies. This would add the renminbi to the dollar, Euro, Japanese yen and British pound. This is yet another move forward for China as they seek to have their currency used as a global reserve currency.
The SDR is not a public tradeable currency. It is a special currency or claim used within the IMF and its members to which members contribute funds to help support those members that need loans from the IMF – perhaps in support of temporary currency exchange difficulties. Britiain, for example, draw on their SDR’s as part of their bail-out by the IMF in the 1970’s. It is remarkable how quickly the IMF is looking to accommodate China’s desires. International firms that trade in Asia need to have a RMB strategy – and soon.