Fears over yuan’s inclusion in IMF currency basket are overblown

The debate over whether the Chinese yuan should be added to the International Monetary Fund’s special drawing right is a tempest in a teapot, according to Capital Economics.

It’s unlikely that the yuan will be added to the exclusive basket of reserve assets this year, the economists said. But even when the yuan, also known as the renminbi, is finally added — as Christine Lagarde, the managing director of the IMF, has said she expects it to be — its inclusion will have little significance, except to Chinese policy makers, who will likely see it as a symbolic victory.

Some analysts believe that inclusion in the basket will spur a rapid increase in demand for the yuan from central banks, sovereign wealth funds and private-fund managers. But the Capital Economics economists say this isn’t true. So called SDRs make up less than 3% of central-bank reserves.

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