Despite the fact that the IMF chose in August to delay for a year the inclusion of the Yuan as part of their Special Drawing Rights (SDR) basket of currencies, their extension may be closing sooner than many thought. This is because in just a few short months, internationalization of the Yuan has accelerated to a total of 9.9 trillion in loans, which is just the spark needed by the world’s largest productive economy to gear towards a critical mass in Yuan usage, and making its inclusion into the SDR a sure thing.
In fact, the IMF is planning to once again take a look at bringing in the Chinese Yuan to the SDR as early as November when they analyze the amount and rate of Chinese monetary reforms and actions that have driven it to become the 4th most used currency in the world.
China’s new yuan-denominated lending reached 9.9 trillion yuan (1.56trillion U.S. dollars) in the first nine months of this year, the central bank said Thursday.
The volume was 2.34 trillion yuan more than that for the same period of last year, thePeople’s Bank of China said in a statement.
In September alone, new loans rose 144.3 billion yuan to 1.05 trillion yuan. HSBC analystQu Hongbin attributed last month’s rise to recovery in home sales and stronginfrastructure investment.
M2, a broad measure of money supply that covers cash in circulation and all deposits,increased 13.1 percent year on year to 135.98 trillion yuan at the end of September. Thepace was faster than 12.2 percent at the end of last year. – En.people.cn
With the Yuan surpassing the Yen as the 4th most used currency less than 10 days ago, it will be very difficult for the IMF to delay its inclusion into the SDR for a more extended period of time, especially since the Japanese Yen is already in that monetary basket. However, China’s goal of increased Yuan internationalization is not simply directed at accomplishing SDR inclusion, since the activation of a new SWIFT type system (CIPS) earlier this month has the Far Eastern power gunning for the U.S. and their long standing hegemony over the global reserve currency.
While the use of the dollar in global trade wanes, use of the Chinese Yuan is accelerating its presence worldwide, and is on pace to not only compete with the dollar for monetary supremacy, but perhaps even surpass it as early as 2017. And once this does occur, then the end of a single polar reserve currency will be at hand, and sovereign economies will have a choice of two powerful currencies in which to use for both trade, and financial stabilization.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com, Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.