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GET ACCESS GO EXCLUSIVE

The I.M.F. decision will help pave the way for broader use of the renminbi in trade and finance, securing China’s standing as a global economic power. But it also introduces new uncertainty into China’s economy and financial system, as the country was forced to relax many currency controls to meet the I.M.F. requirements.

The changes could inject volatility into the Chinese economy, since large flows of money surge into the country and recede based on its prospects. This could make it difficult for China to maintain its record of strong, steady growth, especially at at a time when it economy is already slowing.

The I.M.F. will start including the renminbi in the fund’s unit of accounting, the so-called special drawing rights, at the end of September. Many central banks follow this benchmark in building their reserves, so countries could start holding more renminbi as a result. China will also gain more influence in international bailouts denominated in the fund’s accounting unit, like Greece’s debt deal.

Works Cited

KEITH BRADSHER. “China’s Renminbi Is Approved as a Main World Currency.” NYTIMES. . (2015): . . http://www.nytimes.com/2015/12/01/business/international/china-renminbi-reserve-currency.html?smid=nytcore-iphone-share&smprod=nytcore-iphone

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