Wednesday , 17 April 2024

What Are Implications Of China’s Yuan Becoming a Major Reserve Currency? (+2K Views)

The yuan will be added to the IMF’s basket of currencies used to value economy-usdollar7the SDR in October 2016, with a weighting on 10.92%, which effectively anoints the yuan (also called the renminbi) as a major reserve currency. What are the long-term implications of this? Read on.

The commentary above & below consists of edited excerpts from an article* by Tyler Durden (

The weighting of 10.9% is less than the 14-16% expectation but nationalistically greater than Japan’s Yen and Britain’s Pound.

However, as politically-motivated as this decision may have been, now comes the hard part for China. The inclusion puts new pressure on Beijing to change everything from:

  • how it manages the yuan to
  • how it communicates with investors and the world.
    • China’s pledges to loosen its tight grip on the currency’s value and
    • open its financial system will come under new scrutiny.

As Bloomberg details, there are 4 critical points…

  1. SDR status doesn’t require central banks to hold yuan but could be a catalyst for portfolio reallocation.
  2. Reserve managers for countries having strong trade and funding ties with China have the strongest incentive to increase yuan holdings.
  3. Re-allocations by central banks may be gradual to minimize disadvantageous market pricing.
  4. Re-allocations by private investors will be constrained until capital controls are lifted and transparency improves.
[If the above subject matter was of interest to you then please also read THIS ARTICLE.]
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The above article* was written by Tyler Durden ( and is presented here by the editorial team of (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (see sample hereregister here) in a slightly edited ([ ]) and abridged (…) format to provide a fast and easy read.]