Adding Yuan to SDR Basket Only a Matter of Time

Later this year the IMF might include the Chinese yuan in its official basket of reserve currencies, a political and economic triumph for Beijing in the teeth of U.S. opposition, but slowing growth in China is likely to limit the impact of the victory.

Adding the yuan, or renminbi, to the dollar, euro, yen and pound in the Special Drawing Rights (SDR) basket, as IMF head Christine Lagarde says is only a matter of time, should over time expand its role as a currency for international trade and investment and make the world’s central banks more likely to hold it in reserve.

That in turn should lower transaction costs, exchange risk and borrowing costs for China, already the world’s largest trading nation, and its companies.