Event

As announced by the IMF at the end of last November, the Renminbi is now integrated into the SDR (Special Drawing Rights) basket – until now composed of four hard currencies, namely the US dollar, the euro, the Japanese yen and the British pound. The RMB weight (i.e. 10.92%) in the basket will be the third heaviest after the USD and euro, and ahead of the yen.

Impact on country risk

Adding a currency to the SDR basket is rare – the last time it happened was at the launch of the euro – which indicates that this is a historic monetary milestone. More crucially, it reflects China’s heavy economic weight in today’s world economy and rewards its significant financial and monetary reforms gradually made over the years to increase the RMB’s international use in trade, investments and as a reserve currency. Further liberalisation of China’s capital account will continue even if it will be at a pace dictated by the political agenda, economic growth and the size of capital outflows (stabilised at a lower level while the RMB shows a slowly depreciating trend).

Analyst: Raphaël Cecchi, r.cecchi@credendogroup.com