The Chinese yuan has been added to the IMF reserve basket, becoming the first currency to be added to the list since the emergence of the euro in 1999.
The official entry was made Saturday, bringing to a close, at least partially, Beijing’s years-long struggle for international acceptance on the sort of level enjoyed by the US dollar. The currency now joins the big four: the US dollar, the euro, the yen, and the British pound.
The decision means the Chinese yuan will now be used as one of the International Monetary Fund’s lending currencies in times of emergency economic bailouts. This sort of internationalization is in line with China’s wish for increased legitimacy of its currency.
The move is also evidence of China’s growing role as a power to challenge the global economic dominance of the United States.
The limitations China places on its own markets, however, have themselves been to blame for this delayed outcome.
“It’s an irreversible path towards opening up, integrating into the global economy and playing the economic game by the rules,” proclaimed IMF Managing Director Christine Lagarde.
Her assurance comes as critics say the move is no more than symbolic. Many of them accuse Beijing of exchange rate manipulations and cross-border capital movements.
US Treasury Secretary Jack Lew said China is still “quite a ways” away from the status of a true global reserve currency.
Nevertheless, the IMF said it recognizes the “enormous” changes made over the past decade to bring yuan out into the open.
On Friday, the IMF fixed the relative amounts of the five main currencies in its basket for five years, based on the exchange rate of each one over the last three months.