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April 17, 2011 China PBOC Vice Gov: IMF Currency Basket Could Include BRICS Currencies
The International Monetary Fund should include currencies from emerging economies such as the BRICS nations in its Special Drawing Rights basket to objectively reflect the global economy and assist in the stabilizing global economic volatility, People's Bank of China vice governor Yi Gang said Sunday.
There are two main criteria for a country's currency to qualify as an SDR currency--if the country is a major exporter and if the currency is "freely useable."
"China has qualified as a major exporter," said Yi on the sidelines of the IMF meetings. "China has expanded the use of yuan in cross border trade, investment, and transactions, and the offshore yuan center in Hong Kong is also an important market," he said.
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"Currently, China's yuan is very close to freely useable." Beijing has pledged to speed up reform of the yuan exchange rate mechanism, as part of efforts to boost the yuan's global role. Yi added that a currency doesn't have to be "fully convertible" to qualify to join the SDR basket.
"In the '60s, and '70s, the other currencies that were included in the basket were not fully convertible at that time, but they were freely useable." "The very-obvious contenders [to be included in the SDR basket] are the BRICS nations," he said.
The BRICS emerging economies include Brazil, Russia, India, China and South Africa. "However, when considering any additions, the parties concerned need to adhere to the current rules for qualification," Yi added. China supports the current rules and would not rush the process, he added. Yi suggested the IMF could start a simulation of a new SDR basket, collect data on how it could work and conduct an interim review based on that, possibly leading to changes to the makeup of the SDR basket before the next scheduled adjustment.
The SDR is reevaluated and adjusted every five years, and it was last reviewed in 2010. The IMF's SDR basket, an internal unit of accounting among IMF member nations, is composed of the U.S. dollar, the euro, the yen and the U.K. pound.
Yi reiterated that China supports international monetary system reform, and a good system has to be able to support economic growth, address and stabilize economic imbalances, and has to be robust and resilient. China's central bank governor Zhou Xiaochuan said earlier that the yuan is becoming more important globally and should be regarded as among the first batch of currencies to be added to the SDR.
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