• Monday, 25 June 2018

IMF Decreed China’s Yuan as Global Currency

Yuan, IMF, global

China’s Yuan currency being denominated as one of the global currency will be one point in the history of the state with second largest economy growth in the world. At the same time, also showing that China’s economy evolve more quickly in the middle of the global economy sector. The determination was carried out by the international monetary fund (IMF) some time ago. Currently China has more than 15% gross output in the global economy, equivalent to three times higher than the output a decade ago.

Currency the China will be added in currency reserves group. Yuan, which is also called as renminbi will also included with the other global currencies as United States’ dollar, Europe’s euro, Japanese yen, and the British pound. All of these currencies are a group of currency which have Special Withdraw Rights or Special Drawing Rights used by IMF to make emergency loans to 188 of its member countries. This new design will start to show global effects predicted by September 2016.

For the last few years, China has show its efforts to gain recognition as an international currency. These businesses are applied by the China’s tightening control policy and reforming its financial sector. This decision-making made by the IMF also considered as a proof of Europe weakening for global financial markets. It is regarded as a substitute for some of the role of euro currency in special withdrawal and quickly started to replace the European currency. IMF also provided higher emphasis in yuan compared with Japanese yen and the British pound.

Yuan currency will be 10.92% tighter in the data comparison eyes global. Dollar will be 41.73% (as formerly data 41.9%), euro 30.93% (37.4% than before), Japanese yen in 8.33% (9.4% than before), and the British pound 8.09% (from before 11.3%).

Compared with the increasing role of yuan in the global economy, US dollar looks still dominated the financial sector and global market. Dollar is cited as ‘world’s reserves currency’ seed as the most commonly used currency as deposits around the world. It was because investors still have large trust and capable of having access to foreign exchange in US dollars. IMF Managing director Christine Lagarde said that IMF decision related to yuan is one of historic mark of the economic integration to China in the global financial system.

“This is an acknowledgement that the China’s government had managed to give enormous change at its economic in recent years, reform of China’s monetary and financial system,” Lagarde said. But in addition, yuan increase risks as one of the global currency. With this, China has given certain limit to do business and also limit its individual transfer funds to other countries. If China the open up its market, economically it will be more exposed to the other parts of the world and appeared flowing out capital risk.

Grace Eldora

Grace Eldora Sinaga is a journalistic practitioner, graduated from Faculty of Communication Study Majoring Journalism, Unpad. She loves to learn Asian cultures and photography. She can be contacted at gracel@buminawa.com or twitter @glaceldo.