previous article ~ January 17-18-2011 ~ Asian Financial Forum ~ Add China's Renminbi to IMF Reserve ~ Says Economist Robert Mundell ...
previous video ~ http://www.hktdc.com/info/webcast/v/en/en/1X04AS1N/Nobel-Economist-Mundell-Add-Renminbi-To-IMF-Reserve.htm
Wednesday, 01/19/2011Nobel laureate slams IMF for not including China’s renminbi
The Jakarta Post, Hong Kong
Nobel Prize-winning economist Robert Mundell said Tuesday that the International Monetary Fund (IMF) had made a “big mistake” by not adding the Chinese renminbi(RMB) in the list of currencies used in its newly-reviewed Special Drawing Right(SDR).The Columbia University professor said the IMF must not overlook China’s increasingly significant role in the world economy and should have given the opportunity to China to put RMB in the reserve basket as China’s economy was now the world’s second-biggest just behind the United States’.
Speaking in front of the audience of the 2011 Asian Financial Forum in Hong Kong, Mundell said the IMF had also mistakenly put aside the fact that RMB has become the only inconvertible currency in history that can be expected to appreciate over time. Instead, IMF has decided not to add RMB in the basket due to concerns over its limited use in global trading and investment.
“The [IMF’s] argument about the RMB inconvertibility was actually a technically good one. But tactically, it is like ‘misses the forest for the tree’,” said Mundell, who also played a role in preparing the euro.
The SDR, created by the IMF in 1969 to supplement member countries’ reserves, can be exchanged for freely usable currencies.
In November 2010, the IMF completed the regular five-yearly review of the basket of currencies that make up its SDR and of the interest rate on the SDR. The value of the SDR will continue to be based on a weighted average of the values of a basket of currencies comprising the US dollar, euro, pound sterling and yen.
Previously, it had been speculated that the IMF might include the Chinese RMB in the basket of currencies. The institution, however, finally decided not to pick the currency, saying RMB usage was not wide enough to make it eligible to be included in its SDR.
“Directors noted that although China has become the third-largest exporter of goods and services on a five-year average basis and has taken steps to facilitate international use of its currency, the Chinese renminbi [yuan] does not currently meet the criteria to be a freely usable currency and it would therefore not be included in the SDR basket at this time,” the IMF said in a statement.
With its strong export performance since the 1980s, China has seen its economy grow by 9 to 10 percent annually in the past three decades, making it the largest economy in Asia and the second-largest in the world. It is now the world’s second-largest exporter of manufactured goods.
In a move to strengthen its position, China has begun to internationalize RMB by making it a medium of exchange, unit of account and store of value for transactions with non-residents.
China also introduced an RMB bond market in Hong Kong by issuing RMB denominated bonds in 2007. Since then, the bond issuances in Hong Kong have increased from RMB 10 billion (US$1.52 billion) in 2007 to RMB 12 billion in 2008 and RMB 16 billion in 2009. As of the second half of last year, there were 16 RMB bond issuances in Hong Kong with a total value of more than RMB 35 billion.
Hong Kong’s Secretary for Financial Services and the Treasury K.C. Chan said he believed that the region would make step-by-step moves to develop other RMB denominated investment options aside from fixed-income products.
“In the final stage, we are willing to see investors having options of [RMB denominated] IPOs [initial public offerings] products,” he said in an earlier discussion panel at the two-day forum, which ended Tuesday.
Taking “Asia: Reshaping the Global Agenda” as its theme, the 2011 AFF summit, attended by more than 1,600 regional and international participants, also had discussion panels and workshops discussing various topics related to the region’s growing role in the global economy, including global investment opportunities, economic challenges for Asia and business opportunities in China.
http://www.thejakartapost.com/news/2011/01/19/nobel-laureate-slams-imf-not-including-china%E2%80%99s-renminbi.html
*** related article Link ~ Currency Chaos: Where Do We Go From Here? Where in the world is Robert Mundell when you need him?
(October 2009 Asian Currencies 40% undervalued) Time for currency realignment?
*** Economist Robert Mundell (layed groundwork for Euro) joins UAE's Central Bank
Joseph Stiglitz : ‘IMF Rerserve Currency Can Be Phased in within a Year and yuan phased in a "while" ...
(18 November 2009 'Yuan May enter IMF Kitty (Basket) to Evaluate SDR') Joseph Stiglitz : ‘IMF Rerserve Currency Can Be Phased in within a Year and Dominique Strauss 'Yuan May Enter IMF Kitty (Basket) to Evaluate SDR' ...
IMF: Lessen Dependence on Dollar says Dominique Strauss ... CHINA C. BANK: "The changes are coming" ( they want a basket of currencies)
