(ECNS) -- China will encourage the utilization of yuan at the Asian Infrastructure Investment Bank (AIIB) and Silk Road Fund, as part of efforts to promote the currency's international use and its inclusion into the basket that forms the Special Drawing Right (SDR), local media reported on Thursday.
The China-proposed AIIB and Silk Road Fund may set up special currency funds and issue yuan-denominated loans through both institutions, the report stated.
Initially, the AIIB and Silk Road Fund will depend on the U.S. dollar as its settlement currency, but would encourage the use of yuan when operations enter a mature stage, an anonymous source close to the Chinese central bank told China Business News. The move aims to promote the international use of yuan through investments as well as use of the currency for settlement in international trade, and thus push ahead with its utilization and circulation across the Asia-Pacific region, the source said.
There is still a long way to go towards internationalization of the yuan, as the U.S. dollar will continue to dominate the global financial system in the next five to eight years, the paper quoted Wang Hua, the China head of French business school Kedge, as saying.
Turkey and South Korea separately announced their decisions to join the China-proposed AIIB as its prospective founding members on Thursday, boosting the bank's membership to 36 so far. Australia had earlier voiced hope to join the bank, but has not yet decided on the matter.
The Silk Road Fund, which was opened to investors in February, was designed to finance the Belt and Road initiatives. In 2013, China created the Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives to expand cooperation with countries in Asia, Europe and Africa.
