year.
The Group of 20 major governments agreed in 2010 to give China and other emerging markets a greater say at the IMF, while reducing the dominance of Western Europe on its board. But those changes have not been ratified by the U.S. Congress.
“I think it is important to acknowledge the rise of China, and let them have a fair, proportionate weight in institutions like the IMF,” Frankel said. “If I were at the top of the IMF or the White House, I might
feel that since China cannot be accommodated (with quotas) then we have to accommodate them in this other way (through SDRs), which after all won´t do any harm.”
While China has long met conditions on its exports forming a large enough percentage of global trade, the debate is likely to centre on its capital markets. Although still tightly government-controlled, offshore yuan trading soared some 350 percent on Thomson Reuters trading platforms last year.
Ten nations now buy Chinese assets via its “RQFII” scheme, 14 countries have yuan clearing arrangements, and 28 other central banks have currency swap lines with China.
But David Dollar, a former U.S. Treasury attaché in China now with the Brookings Institution think-tank in Washington, still had his doubts.”My sense is at the moment, the yuan is not freely usable,” he said.”A big asset management firm can´t just suddenly decide to take a big position in Chinese yuan, and buy Chinese government bonds. That´s all highly restricted.”
Nevertheless, the yuan has jumped to the top of the list of priorities for those running market operations at the world´s big banks, and London, the world´s main currency trading centre, is clearly enthusiastic.
“China´s commitment since 2013 has been to head for a managed float and it is going to be one of the significant trading currencies,” said Simon Derrick, head of global research at Bank of New York Mellon in London.”So why wouldn´t it be included in the SDR and why not in central bank reserves?”