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China and the IMF

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October 1, 2016 was an important day for international money (monies) and an important day in the history of the People's Republic of China.

The International Monetary Fund added the Chinese yuan to a basket of currencies that it uses for its loans, known as the Special Drawing Rights currencies. The SDR list also includes the US dollar, the Japanese yen, the British pound, and the euro. That's it. Full stop. With the addition of the yuan there are bow as many SFR currencies as there are veto power countries in the UN Security Council.

One confusing fact about the yuan is semantic: it seems to be used as a synonym with "renminbi." Actually, the yuan is the base unit, the renminbi is the currency, in much the same way that the "pound" is the base unit of the British "sterling." But over the last few decades, "pound" has become the most customary term in any context, and "sterling" is finding itself moving into the linguistic retirement home.  Likewise, "yuan" is slowly pushing the three syllable related term into retirement.

"The inclusion into the SDR is a milestone in the internationalization of the renminbi, and is an affirmation of the success of China's economic development and results of the reform and opening up of the financial sector," the People's Bank of China said in a statement celebrating October 1.

As it happens, October 1 is also the PRC's national holiday, the anniversary of its founding on that day in 1949. That the inclusion in the SDR came about on that day seems to have been from the PRC's point of view a lucky accident (from the IMF's point of view, the much more important fact abut October 1 is that it began a new financial quarter).


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