The Executive Board’s decision to include the renminbi in the SDR basket is an important milestone in the integration of the Chinese economy into the global financial system. It is also a recognition of the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems. The continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy.
IMF Managing Director Christine Lagarde said After the Executive Board met and approved inclusion of the renminbi in the SDR basket
Chinese Currency Added to SDR Basket
On November 30, 2015, the Executive Board completed a regular five-yearly review of the basket of currencies that make up the SDR. The Board decided that the Chinese renminbi met all criteria for inclusion in the SDR basket, and, effective October 1, 2016, is determined to be a freely usable currency that will be included in the SDR basket as a fifth currency, along with the U.S. dollar, euro, Japanese yen, and British pound.
Under the SDR valuation method, the SDR currency basket is reviewed every five years unless developments in the interim justify an earlier review. SDR reviews evaluate the currency selection criteria, the selection of currencies, the weighting methodology, and the composition of the SDR interest rate basket, with a view to making the SDR more attractive as an international reserve asset. In making the decision to include the renminbi, Executive Directors “noted the substantial increase in the international use and trading of the renminbi since the last review, across all the indicators used to inform the assessment. They agreed that the renminbi can now be considered in fact, widely used to make payments for international transactions” and “widely traded in the principal exchange markets.”
The SDR interest rate will continue to be determined as a weighted average of the interest rates on short-term financial instruments in the markets of the currencies in the SDR basket.
What is the Currency Weighting of the SDR Basket?
2010 and 2016
The five currencies in the new SDR basket will be weighted as follows as of October 1, 2016, based on the formula agreed by the IMF Executive Board:
2010
U.S. Dollar
41.9%
Euro
37.4%
Yen
9.4%
Pound Sterling
11.3%
2016
U.S. Dollar
41.73%
Euro
30.93%
Renminbi
10.92%
Yen
8.33%
Pound Sterling
8.09%
Benchmark Interest Rates
2010
Benchmark rates used as representative interest rates for the four currencies at the 2010 Review:
U.S. Dollar
market yield for three-month U.S. Treasury bills
Euro
three-month Eurepo rate
Japanese Yen
three-month Japanese Treasury discount bill rate
Pound Sterling
market yield for three-month U.K. Treasury bills
2016
Benchmark rates used as representative interest rates for the five currencies in the basket on October 1, 2016 (once the inclusion of the renminbi in the SDR is effective):
U.S. Dollar
market yield for three-month U.S. Treasury bills
Euro
three-month euro yield (three-month spot rate for euro area central government bonds with a rating of AA and above published by the European Central Bank)
Pound Sterling
market yield for three-month U.K. Treasury bills
Japanese Yen
three-month Japanese Treasury discount bill rate
Renminbi
three-month benchmark yield for China Treasury bonds (published by the China Central Depository & Clearing Co., Ltd.)
