links ~ IMF ~ SDRs and the U.S. Dollar ... Articles of Interest ...October 4, 2011
EU to back SDR basket expansion road map at G20-document
Europe will call next week at a meeting of G20 financial leaders for a clear plan to expand the IMF'S artificial SDR currency, an EU document showed on Tuesday -- a move that could put pressure on China to allow its renminbi to be more market-driven.
The International Monetary Fund's Special Drawing Right is based on a basket of the dollar, the euro, yen and sterling -- fully convertible and widely used currencies.
Such a road map could put pressure on China, the world's second biggest economy, to set a timetable for relaxing controls on the renminbi's exchange rate.
The United States and Europe have long called for Beijing to let the renminbi, also known as the yuan, to appreciate to help rebalance the global economy.
"The G20 should focus on ... the need for G20 countries with non-market based exchange rate regimes, in particular China, to commit to measurable progress in moving towards more market-determined exchange rate systems," a terms of reference document for EU delegations to the G20 meeting said.
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Finance ministers and central bank officials from the world's 20 biggest developed and developing economies, the G20, meet next week in Paris and one of the topics of discussion will be the reform of the international monetary system.
Some economists believe the SDR could become a global reserve currency, lessening the world's dependence on the dollar, but should better reflect the global economic balance of power by including currencies such as the yuan.
"Any changes to the SDR basket should be consistent with the purpose and the role of the SDR. However, the indicators underlying the 'free usability criterion' could be clarified," a terms of reference document for EU delegations said.
"We support efforts to provide a clear road map for potential new currencies with transparent entry criteria based on existing principles," said the document, approved by EU finance ministers.
Beijing wants the yuan to be included in the long run in the SDR basket to cut its dependence on the dollar and give its currency global economic influence.
"We welcome the yuan to be accepted and recognised by the international community," China's foreign ministry spokesperson Jiang Yu said last month.
China's G20 partners expect the inclusion of the yuan in the SDR would engage China more in global economic issues, but they set the condition of more convertibility of the Chinese unit.
Chinese central bank governor, Zhou Xiaochuan, said in September there was no timetable to make the Chinese currency fully convertible and China saw no "special urgency" in having the yuan included in SDR.
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