China’s Yuan Could be Named a Reserve Currency by the IMF
China's Yuan is expected to be declared as a reserve currency on Monday by the International Monetary Fund. Now the challenge for the Chinese officials will be to prove whether it can be treated like one.
If the IMF adds yuan to its list of reserve currencies as broadly expected, it will enjoy a status that the U.S. dollar, the euro, Japanese yen and the British pound enjoys. The inclusion of the currency will also reflect the yuan's growing status as China's position in global finance increases.
However for Beijing, it's not that easy, as inclusion of the currency puts new pressure on China to change the way it manages the yuan, also locally known as renminbi. It also has to watch the ways it communicates with the investors and the entire world. China's efforts to loosen its tight grip on the value of the currency and open its financial system will now also come under scrutiny.
Sheng Songcheng, head of the survey and statistics department at the central bank of China said, "We will have to build up confidence in renminbi assets from investors both at home and abroad and at the same time, prevent the financial risks associated with a more global currency. That calls for carrying out various financial reforms in a coordinated way."