The International Monetary Fund (IMF)'s executive board on Monday approved the inclusion of China's currency renminbi (RMB) in its Special Drawing Rights (SDR) basket as an international reserve currency.
However, experts say the inclusion is just part of the long journey for China's yuan to become a global currency.
Effective from Oct. 1, 2016, the RMB will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the euro, the Japanese yen and the British pound, the IMF board said.
The RMB will have a weighting of 10.92 percent in the new SDR basket, while the respective weighting of other currencies in the basket are 41.73 percent for the U.S. dollar, 30.93 percent for euro, 8.33 percent for the Japanese yen and 8.09 percent for the British pound, according to the IMF.
The SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries' official reserves. It can be exchanged among governments for freely usable currencies in times of need.
The IMF reviews the currencies in the SDR basket every five years, and whether to add the RMB to the basket is a major issue for this year's assessment.
To meet the IMF's criteria, Chinese authorities have undertaken a series of reforms in recent months, such as improving its foreign exchange rate formation system, opening up its interbank bond and forex markets, and improving data transparency by subscribing to the IMF's Special Data Dissemination Standard (SDDS).
For more of RMB's joining into the elite currency club, see this early report.
