Undue concern over yuan
Updated: 2015-08-06 07:50
A cashier at Rural Commerial Bank in Lianyungang, Jiangsu province, counts currency on Nov 7, 2014. Si Wei / For China Daily
The technical concern that a recent report by the International Monetary Fund expressed over possible financial market disruption resulting from the inclusion of the yuan in its Special Drawing Rights basket is understandable.
Yet it is by no means a justified excuse to delay the inevitable.
Instead, if the IMF is to bring itself in line with the realities of the global economy and the world's urgent need for a more diverse monetary system to counter a future financial crisis, it should do more to help facilitate the internationalization of the Chinese currency.
The IMF executive board is reportedly scheduled to decide in November whether to add the yuan into its benchmark currency basket comprising dollars, euros, pounds and yen.
Now, in a seemingly cautious way, its report suggests extending the current SDR basket by another nine months to allow more time for SDR users to adapt to the proposed new basket.
Unfortunately, the dire reality is that the world economy is bracing itself for the slowest annual growth since the 2008 financial crisis, while developing countries across continents are increasingly pressured by capital outflows triggered by the United States looming interest rate hike. These problems will not automatically go away with the internationalization of the yuan. But in the long run, the yuan's internationalization will create a more diversified global monetary system that may strengthen financial stability.
Of course, the rise of the yuan may affect the dollar's centrality in global finance. But such political concerns should not be allowed to influence the IMF's decision.
Hence, the so-called technical concern over market disruption does not provide a substantial reason for the IMF to slow the internationalization of the yuan, unless it cannot see the cloud of uncertainty that hangs over the US dollar's dominance.