IMF Seen Approving Yuan As "Reserve Currency"

Tyler Durden's picture

Several days ago, Citi announced that it "expects the upcoming IMF review (scheduled for early-November) will probably lead to China’s inclusion in the SDR basket from late-2016. But we expect that the CNY will over time weaken versus the USD either way — either because of a poor outcome from SDR review or (if China joins the SDR) because of gradual (and limited) FX liberalization."

While it remains to be seen just how negative the impact on the CNY would be as a result of any possible SDR inclusion, and the definition of China's currency as a reserve currency, it now appears virtually assured that the IMF will include the CNY in its SDR basket, "validating efforts by President Xi Jinping to push through policies aimed at making the world’s second-biggest economy more market oriented, boosting China’s prestige as it prepares to host Group of 20 gatherings next year."

Just a few short weeks after The IMF appeared to snub China by delaying its decision on Yuan inclusion in the SDR basket, Bloomberg reports that Otaviano Canuto, executive director at the IMF for 11 countries including Brazil, said "prospects for approval seem to be favorable," adding that the story "is going in the direction of the renminbi becoming a necessary component of the SDR." China is taking that as a 'yes' and is preparing statements celebrating IMF SDR approval.

Per Bloomberg:

International Monetary Fund representatives have told China that yuan is likely to join the fund’s basket of reserve currencies soon, according to Chinese officials with knowledge of the matter.

 

IMF has given Chinese officials strong signals in meetings that yuan is likely to win inclusion in current review of Special Drawing Rights, said three people who asked not to be identified because talks were private

 

Chinese officials are so confident of winning approval that they have begun preparing statements to celebrate the decision, according to two people

 

Board has requested that IMF staff members look into some operational challenges of including yuan in the basket, such as ability of fund’s 188 member nations to quickly convert SDRs into yuan, according to another person familiar with the matter.

 

“We realize that although we’ve done a lot, it’s really first up to the staff, and second up to the board, to make a final judgment,” Jin Zhongxia, China’s representative to the IMF executive board, said in interview Friday. “We have to fully respect their decision”

As one analyst notes, “I think a political decision has already been made,” said Domenico Lombardi, director of the global economy program at the Centre for International Governance Innovation in Waterloo, Ontario.

“The Chinese have invested considerable political capital. They’ve mobilized their intellectual and political resources to this purpose, and it’s a case that’s difficult to argue against.”

* * *

“The most probable outcome is the board will vote to include the renminbi in the SDR basket,” said Meg Lundsager, who served as the U.S. representative on the IMF’s executive board from 2007 to 2014. “I really haven’t heard any big opposition. If there were countries which had real problems with it, they would have been raising their concerns.”

 

The U.S. took a step toward backing China’s SDR bid last month, when it softened its insistence that the Chinese implement financial reforms to win support. The U.S. now says it will support inclusion of the yuan if it demonstrates it meets the IMF’s technical criteria.

 

“This is going to make it very hard for the Chinese to undo a lot of these reforms,” said Lundsager, now a public-policy fellow at the Woodrow Wilson International Center for Scholars in Washington. “Once you move into this group of major currencies, it becomes pretty much impossible to backslide.”

The bottom line is that the "internationalization" and an increasing free float of the Yuan is bearish. And since the currency urgently needs even more devaluation as today's PBOC rate cut confirmed, this may just be the IMF's way of greenlighting even more devaluation for China's currency. And since any devaluation would lead to a surge in capital outflows, what the IMF is doing is merely blessing the Yuan's weakness while pretending it is in a position of strength, in an attempt to slow down the capital outflow as much as possible.

China's offshore Yuan has plunged to 1-month lows in the last few days (and decoupled - for now - from the onshore market suggesting outflows are accelerating)

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
venturen's picture

Why not...it isn't like they are most dishonest than the US or Europe

15horses1donkey's picture

Bloody well, why won't they let us in the basket? http://zhc0.com

 

Boris Alatovkrap's picture

Yuan bai pei pa? Wai no bai ying chai na yuan? Pei pa mo ni chi pa in chai na.

Chuck Walla's picture

That must be hard to say in Russe.

FORWARD SOVIET!

SILVERGEDDON's picture

15horses1donkey.

IF ZERO HEDGE HAD A FUCKING CURRENCY OF IT'S OWN, IT WOULD BE MINTED IN INCORRUPTABLE NON HYPOTHECATED NON DERIVATIVE NON MARGIN ABLE SILVER OR GOLD.

Jesus, fucking kids these days. You all think technology is a miracle. All it is is electrons that can be made to go poof any fucking minute now.
Crypto currency is just a fancy name for digital fractional reserve banking - without the reserve, or the bank.

If I blew up your phone right now, you would look like a cow at the slaughterhouse just at the moment the bolt gun goes off - " How could you do this to me ? What'll I do now ? "
Improvise. Adapt. Overcome. Triumph over adversity.
And, transform your idea into minting a fucking physical coin out of noble metals, with Tyler's permission before he copyright lawyers your ass into bankruptcy.

Lastly, China owns Australia - you are just a large open pit mine to them.

So, go to work, and then tie your kangaroo down, or whatever else you do for sport between shifts for your boss, Wi Awn Yu.

Dubaibanker's picture

Your weekend video viewing has arrived!

If you have been reading the western media, they talk of doom and gloom in China. However, that is a figment of their imagination and shows their lack of understanding of what is going on in China.

China is shifting from being an export driven economy to a consumption driven economy. In the last 7 years, China has moved it's economy from 39% being in service/consumption sector to close to 50% in the service/consumption sector. Hence, their exports and manufacturing have to slow down. But that is not the end of the world if the people are employed, earning more and are creating world class giant companies.

Today, just over 100 million people are categorised as 'Middle Class' in China who are now the largest middle class group in the world, having beaten USA this year.

According to McKinsey Consulting: As China’s consuming class has grown (it now numbers more than 100 million households and is expected to reach more than 200 million by 2025),

There are a shocking 160 cities in China with a population above 1 million.

Guess how many cities in America have population above 1 million: 10 :)

There are 21 cities or urban areas with a population above 5 million in China!

 Meanwhile, in America there is only 1 city or urban area with a population above 5 million which is NYC! Just one! :)

You must watch this series of video documentaries created by Singapore based channel News Asia:

Watching these mind blowing documentary series and seeing the scale of work and amount of money being spent will put tremendous confidence in your thinking about the future demand and coming solid growth in China. This will allow stocks to rise, currency to grow, economy to strengthen and eventually beat the US economy in all aspects over the next few years.

Part 1 http://video.toggle.sg/en/series/the-new-silk-road/ep1/345400

 Some statistics in this fascinating documentary:

Inland China is now growing faster than port cities due to congestion, over population etc in the port cities. In the first 6 months of 2015, Chongqing a new city at the heart of the New Silk Road Project grew 10.7% GDP in just 6 months!

Chongqing is 3 times larger than Shanghai! 33 million people live here which is double that of Beijing!

129 out of Top 500 Fortune 500 companies are already present in Chongqing over the last 7-10 years.

 USD 112 billion will be spent on 300 new projects on the New Silk Road aside from creating a BRICS bank (USD 50bn), Asian Infrastructure Investment Bank (USD 100bn)and USD 40 billion spending on Silk Road Fund

1 out of every 3 computers in the world are built in China.

1 new Free zone in Chongqing being built in China at 1,200 sq kms is DOUBLE the size of ENTIRE SINGAPORE!

Govt helps in land acquisition, subsidies, infra, construction etc.

2.63 million cars were built in Chongqing last year which is half of all cars built in Germany!

In one large car company, in order to retain employees, they have hired chefs from FIVE STAR HOTELS!

From 6 weeks down to 2 weeks is now the time required to reach Europe from China for goods.

China has spent a shocking USD 6.75 TRILLION to shift 400 million farmers to urban centres and provides them training and jobs.

Beijing to Spain will be covered on this New Silk Road railway project. It will also include the world's largest railway project.

Millions of jobs will be created in entertainment, mines, education, hotels, refineries etc.

Huge tax benefits and subsidies are being provided for many new factories being created in variety of sectors in the new inland cities.

London will be connected to China by rail! Parts of the network are already running.

If all goes well, USA could be linked via Russia and Alaska and Canada to China by rail sometime in the future and travel time will be only 32 hours!

Part 2: http://video.toggle.sg/en/series/the-new-silk-road/ep2/346018

Since 2012, the inland Chinese city Lanzhou was transformed from a desert land to entire city with hundreds of buildings and roads and railway network for the New Silk Road, once the Govt decided to spend billions.

Chinese oil rig companies also invest heavily in Iran by supplying rigs and oil pipes. In addition, oil pipelines are to be constructed from Iran to China via Pakistan.

Part 3  http://video.toggle.sg/en/series/the-new-silk-road/ep3/346583

China-Kazakhstan deals in 2015 thus far have been USD 23.6 billion already being invested by Chian into Kazakhstan.

This is 10% of annual GDP of Kazakhstan.

Kazakhstan railways itself has spent over USD 60 billion on creating a new railway network associated with the New Silk Road.

 2.

We also have a research report from Ernst and Young describing in detail what this new project is all about:

 Riding the Silk Road:

 China sees outbound investment boom 

Outlook for China’s outward foreign direct investment

March 2015

http://www.ey.com/Publication/vwLUAssets/ey-china-outbound-investment-report-en/$FILE/ey-china-outbound-investment-report-en.pdf

 3.

According to Goldman Sachs:

CHINA IS TRANSFORMING THE GLOBAL ECONOMY

 

THE RISE OF CHINA'S NEW CONSUMER CLASS

http://www.goldmansachs.com/our-thinking/pages/chinas-new-consumer-class.html

http://www.goldmansachs.com/our-thinking/interconnected-markets/growth-of-china/chinese-consumer/

CHINA IS TRANSFORMING THE GLOBAL ECONOMY

CHINA: AN ECONOMY IN TRANSITION

SEP 2015

http://www.goldmansachs.com/our-thinking/interconnected-markets/growth-of-china/chinese-consumer/

Breakdown of the consumption led growth in China is as follows:

1.4 million individuals have income above USD 500,000

146 million individuals have income above USD 11,733 pa

236 million individuals have income above USD 5,858

387 million individuals have income above USD 2,000

These numbers are staggering when compared to any other country on the planet.

 China’s middle class has overtaken the US’s to become the world’s largest

http://qz.com/523626/chinas-middle-class-has-overtaken-the-uss-to-become-the-worlds-largest/

4.

According to McKinsey Consulting, the future of the world will be based on innovation and low cost base in China:

THE CHINA EFFECT ON GLOBAL INNOVATION - McKinsey 

In the next ten years the “China effect” on innovation will be felt around the world as more companies

use China as a location for low-cost and rapid innovation. The overall China effect could be disruptive,

bringing large-scale yet nimble innovation to serve unmet needs in emerging markets and produce

new varieties of goods and services for advanced economies. Around the world consumers could

benefit from better goods at lower prices.

So don't be afraid of investing in China because the new stocks being listed or new bonds being issued will remain stable and rise for years to come....

Kayman's picture

Dubai

Yakkity-yak, bullshit-bullshit.  If China had any courage, and they don't, they would de-peg from the dollar.

What is the point in having the yuan in the IMF basket if it is chained to the FRN.  Does mommy still need to hold your hand ?

Dubaibanker's picture

Yeah! Your mommy comes over every night! She holds a lot of things besides my hands....

Study basic economics first and then say something useful asshole!

Otherwise go fuck yourself.

thunderchief's picture

Of course.

They've devalued,  cut interest rates, printed money till the cows come home, and pumped their markets, even jailing sellers.

All IMF requirements met.

Panafrican Funktron Robot's picture

There are some very prominent entities in China that are Zionist assets.  

http://www.foreignpolicyjournal.com/2010/08/18/chinese-tv-series-lauds-i...

China continuing to play ball with Zionist interests = SDR inclusion / continued .mil support

flapdoodle's picture

I'm not so sure the Chinese are in bed with the Zionists. Remember that the Sasoon family (intertwined with the Rothschilds) were one of the main dealers in the opium forced down China's throat by the English.

The Chinese are unlikely to forget that.

More likely, the Chinese are paying homage to the power the Zionists have over the World, and are showing they can do business with them (taking a cue from Putin who handles Israel the same way).

ali-ali-al-qomfri's picture

and does this tie in with China birding nucurar powel prants?

why wood England do that?....and showcase it.....?

Never One Roach's picture

I'm beginning to wonder about my dentist ... Dr Wangstein ....

KnuckleDragger-X's picture

They'll make it just in time to join the depression as a full member of the legion of the boned......

HardAssets's picture

Criminal psychopath gangs competing against each other -

In the meantime, they gotta fool their local pawns that its all 'for the country'.

'The Country' consists of the various symbols (flags), stories, myths, songs, etc that the pawns have been indoctrinated with since childhood.

Its really the psychopaths versus Humanity, but the pawns never see that. Theyll put on a soldier suit and kill some other smuck, who probably is just as clueless as they are. And the pawns back home will cheer.

yogibear's picture

It's all about currency wars for now.

williambanzai7's picture

China has shown its willingness to dirty its hands with ink...

HardAssets's picture

What/who is 'China' ?

What/who is 'America' ?

Why is it that we never ask the most basic questions, much less answer them ?

P.S. - Well, Gen Smedley Butler USMC asked those kinda questions. He was an exception.

Kayman's picture

Billy

And someone was suggesting on another thread that Chinese pollution actually reduced the amount of children with birth defects.  What a glorious system- the shining light hurts my eyes.

Sorry_about_Dresden's picture

How can the IMF, FRBNY, Treasury realistically think the reminbi would or could be considered undervalue w/ Chinese consumers having zero debt, the PRCSWF jammed packed w/ $trillions$ of  US Treasury debt??????

How can they even suggest the reminbi will do anywhere but parity, and lower?????

You live in HK!

How do you see it? 

Colonel Klink's picture

Funny a long time ago people talked about the SDR being conspiracy theory about wanting to be implemented.  Seems as if another has become fact.  There is absolutely ZERO need for the SDR, other than to further the control by the bankers over the rest of the world!

KnuckleDragger-X's picture

SDR status will put them in the position of haing their currency in a free float with all the other basket currencies, which means they will have a tougher time controlling its value. They will be gamed by JPM, GS etal, remember the IMF is an American creation under American control......

Kayman's picture

Knuckle 

"their currency in a free float" 

Yeah, wake me up when that happens- they are scared shitless to de-peg from the dollar.

You have to be pretty confident which direction your currency is going to go in a free market. The yuan could double in value or fall in half.

Implied Violins's picture

Yes...and here's a 'blast from the past' predicting all of this in 1988, from the pages of the Economist:

https://socioecohistory.wordpress.com/2014/07/26/flashback-1988-get-read...

PTR's picture

There is absolutely ZERO need for the SDR, other than to further the control by the bankers over the rest of the world!

 

Allegedly. returning money responsibilities to national treasuries is all part of the plan.

 

But I guess we'll see, right?

 

cowdiddly's picture

Turn out the lights
The party's over
They say that
All good things must end
Call it tonight
The party's over
And tomorrow starts
The same old thing again pre-brokeback Willie N.

Kaiser Sousa's picture

misery loves company its said...

this obviously explains the hit on Gold and Silver phony paper prices this morning....

 

 

 

not.

RawPawg's picture

correct me if i'm wrong,but didn't i read a while back that if they go in on SDR.this would speed up the us dollar demise?

 

help a simple minded bro out,y'all

 

thanks 

Dead Canary's picture

The IMF is basically a US run institution. The US has the most votes. With China in there, we lose our majority. If China is included, I think it means the US (and the dollar) is losing clout.

Panafrican Funktron Robot's picture

"The IMF is basically a US run institution. The US has the most votes. With China in there, we lose our majority."

Who controls both the USD and the renmibi?

" "Give me control of a nation's money and I care not who makes it's laws" — Mayer Amschel Bauer Rothschild 

Dead Canary's picture

True. National boundaries are fading. More and more the banks are making the rules.

Maybe the US isn't losing anything because no single nation matters anymore.

"One Bank, One World." New World Order.

BeaverCream's picture

LOL as if the elite banking institutions are governed by some sort of democratic election process. 

RawPawg's picture

"The IMF is basically a US run institution"

if that's the case,then would this be a first sign that the "Club" knows the jig is almost up?

RawPawg's picture

and yet,the punch-bowl keeps getting a refill...i give up

proud to add,I'm a recovery alcoholic...no dog in THIS game..win-win

wcvarones's picture

"prospects for approval seem to be favorable" ???

What is the IMF, a fucking Magic 8-ball?

Implied Violins's picture

Not exactly. They TELL the 8-ball what answer to give.

Kirk2NCC1701's picture

LOL, and as if the GBP "deserves" to be a Reserve Currency!

I mean, the U.K. is such an economic powerhouse. Take out the paper ware products from The City, and what have you got? Tourism, Pomp & Circumstance.

Still got separate faucets for Cold and Hot water? LOL.

Kayman's picture

"Still got separate faucets for Cold and Hot water"

Hot water ?  Hot water's been invented ??  

Government needs you to pay taxes's picture

If one places 6 turds in a basket, does any 1 of them stick out as comparatively attractive?

Colonel Klink's picture

Fiat currencies are like turds, they taper down to nothing.  Good analogy!

wmbz's picture

Yes if it's highly polished!

We/USSA use Dr.Thunderbuns aclaimed turd polish!