On Nov. 30 the IMF fully announced that the Chinese Yuan would be accepted as a global currency within the banks Special Drawing Rights (SDR) basket of currencies, and with this move China is now an international player in the global monetary system. And perhaps most interesting in the next stage of support towards the future of the dollar and its singular reserve currency status, is that countries and banks are already rushing in to push the currency towards greater use just one day after it became part of the IMF.
Following the IMF’s announcement, the nation of Argentina publicly threw in their support for the Chinese Yuan to expand its reach in global trade and monetary hegemony. And this act will help open the door for many more nations to divest their dollar reserves since many of the mechanisms that required the use of the dollar have already been duplicated by Beijing over the past three years.
The IMF’s decision to include China’s currency, the renminbi, into its Special Drawing Rights (SDR) basket is good news for Latin America, an Argentine economist said on Monday.
“The currency of China, which is a strategic partner of many countries on our continent, willbegin to circulate globally as much as the US dollar and the euro,” said Gabriel Holand in anarticle in Argentina’s economic daily BAE.
According to Holand, these four currencies “command the global economy…and the nextinvitation naturally belongs to China.”
The renminbi’s inclusion in the IMF’s SDR basket of currencies allows central banks to use itas a reserve, he said, adding that this would be very important for Latin America. – China Daily
However, Argentina is not the only entity to jump on the RMB bandwagon following the IMF’s decision. The newly formed BRICS bank also announced on Tuesday that they would be facilitating lending in Chinese Yuan, and is seeking to push the currency to greater levels as nations seek to borrow in currencies other than the dollar, and under more friendly terms than from the IMF or World Banks.
The BRICS New Development Bank (NDB) could start operations by borrowing in the Chinese currency, according to the bank’s Vice President Vladimir Kazbekov.
He says the bank will focus on loans in the national currencies of the bank’s potential customers.
“Considering the stability of the Chinese currency and the scale of the Chinese debt market, I think that one of the first steps in providing the New Development Bank with funds may be entering the Chinese market to borrow in yuan,” Kazbekov said on Tuesday at the opening of a BRICS media summit in Beijing. – Russia Today
Ultimately, the IMF’s inclusion of the Chinese Yuan has opened a floodgate that had been resistant in allowing a real competitor to the dollar from moving into the global monetary system. And now that the Yuan’s internationalization is well underway through bond hubs, currency swaps, and global recognition, the rush towards that critical mass of nations choosing the Yuan over the dollar is now at hand, and it will only be a matter of time before the next major sea change takes places in which OPEC and others in the oil community allows for energy to be bought and sold in Chinese RMB.
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.