What it means when the Renminbi officially joins IMF’s SDR basket tomorrow

SINGAPORE (Sept 30): China’s renminbi will become a major international currency tomorrow, when it officially becomes the fifth currency to enter the International Monetary Fund’s Special Drawing Rights basket, joining the US Dollar, euro, Japanese yen and British pound.

The RMB’s addition is the first change to the SDR basket since 1999, when the euro replaced the Deutsche mark and the French franc. It is also an acknowledgment of the role China plays in the global economy and a step forward in its attempts to make the currency more freely traded.

SDRs were created by the IMF in 1969, when the world’s governments needed assets for their international reserves but supply of gold and USD was running short. They function as a supplement to the existing reserves of member countries.

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