September 4, 2009
China to use yuan, not dollars, for IMF bond buy
Reuters
BEIJING Reuters - China will use yuan, not US dollars, to buy up to $US50 billion in International Monetary Fund-issued bonds, according to an agreement between the People's Bank of China and the IMF seen by Reuters.
The expectation had been that China would use dollars to buy the bonds, which are denominated in Special Drawing Rights (SDR), the IMF's unit of account, as it seeks to diversify its vast foreign exchange holdings.
But the agreement stated that China will pay the IMF up to 341.2 billion yuan ($US50 billion), also known as renminbi, for the SDR bonds, based on the August 25 exchange rate.
The purchase price of each IMF bond should be paid "by transfer of the SDR equivalent amount of Chinese Renminbi to the account of the Fund", the agreement stipulated.
A Chinese central bank official, speaking on condition of anonymity, said it was not clear how the bond purchase would be implemented in practice.
