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Full Version: US/Obama Push For Yuan to be included in Special Drawing Rights
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Quote:The Obama administration took a step toward backing China’s bid to have the yuan recognized as a global reserve currency, as the U.S. softened its insistence that the Chinese implement financial reforms to win support.
The International Monetary Fund is reviewing whether the yuan should be included in its Special Drawing Rights, a basket of reserve currencies used by the lender as a unit of account. After U.S. President Barack Obama and Chinese President Xi Jinping met Friday in Washington, the two sides issued a statement saying the U.S. supports the inclusion of the yuan “provided the currency meets the IMF’s existing criteria in its SDR review,” a point Xi highlighted in his press conference with Obama.
The shift in the U.S. position follows the administration’s failed attempt to prevent allies from joining the China-led Asian Infrastructure Investment Bank earlier this year, a strategy that was faulted by former policy makers including ex-Treasury Secretary Henry Paulson.
In June, a joint statement by the two countries said the U.S. “supports China making the reforms that would lead to the inclusion” of the yuan in the basket. Friday’s statement mentions U.S. support for “China’s commitment to implement further financial and capital market reforms.” The new language clarified to the Chinese that the IMF’s assessment of whether the yuan meets the fund’s SDR criteria will be the determining factor for American support, said an administration official who asked not to be identified.
Winning the IMF’s endorsement would validate efforts by Xi to push through policies aimed at making the world’s second-biggest economy more market-oriented, boosting China’s prestige as it prepares to host Group of 20 gatherings next year. At least $1 trillion of global reserves will convert to Chinese assets if the yuan joins the IMF’s reserve basket, according to Standard Chartered Plc and AXA Investment Managers.
“The train delivering the SDR to President Xi in time for the November 2016 G-20 Summit in Hangzhou remains on schedule,” said David Loevinger, managing director of emerging-markets sovereign research at asset manager TCW Group Inc. in Los Angeles. There’s “plenty of wiggle room” within the IMF criteria to allow China to meet the fund’s requirements, said Loevinger, a former senior coordinator of China affairs at the U.S. Treasury.
The IMF’s executive board will make a decision on the yuan reserve-currency issue as soon as November. Approval requires 70 percent of the fund’s voting shares, and even if the U.S. opposed the move, the nation would need several allies because the U.S. has about 17 percent of votes. Many analysts have been predicting approval.
The U.S. and China also look forward to continuing to discuss methods to facilitate yuan trading and clearing in the U.S., according to the joint statement.
U.S. Treasury Secretary Jacob J. Lew in previous comments this year has put the onus on China to prove the yuan belongs, saying the country needs to further liberalize its currency policy and complete financial reforms before it can get the IMF’s nod.
Friday’s shift brings the U.S. closer to the positions of the U.K. and France. In a speech Tuesday in Shanghai, U.K. Chancellor of the Exchequer George Osborne said he’d like to see the yuan added to the IMF basket as the currency becomes increasingly important in global markets and “meets existing IMF criteria.”
French Finance Minister Michel Sapin said last week in Beijing that France favors including the yuan in the SDR basket, though China still needs to meet the IMF’s technical requirements first, according to Francois Coen, Sapin’s spokesman.


China’s capital outflow hit a record $141.66 billion in August as a result of the country’s biggest currency devaluation since 1994, according to data compiled by Bloomberg.
The pullout of money from the country exceeded the previous record of $124.62 billion in July, Bloomberg’s so-called “hot money” gauge showed. It is an estimate of the sum of foreign exchange purchases by banks and the change in foreign exchange deposits to measure flows into and out of the country.

The outflow accelerated in August following China’s shock devaluation of the yuan. The Central Bank of China has cut its daily reference rate by 1.9 percent, its biggest downward adjustment in 20 years. The aim, it said, was to revive faltering exports.

Beijing has ramped up efforts to support the slowing economy and an almost 40 percent stock market drop since late June. The government cut interest rates for the fifth time since November and pledged to support the market by buying shares. However, the measures did not stop factory activity contraction, which hit a six-and-a-half year low in September, the worst result since March 2009. Concerns over the world’s second biggest economy slowing down made investors turn to safer assets.

Meanwhile, experts have different forecasts on the issue.

"My worry is that, given the relatively large economic downward pressure, as China is opening up the capital account, it means more money will leave China," a PBOC adviser and Peking University economics professor Huang Yiping was cited as saying by Bloomberg. "If there’s an overall capital outflow in the future, it will bring depreciation pressure."

"The current capital outflow is just a temporary market reaction," said Sheng Songcheng, head of the PBOC’s statistics and analysis department. He claimed that China’s economic slowdown, rising debt level and stock market swings all can cause short-term panic for investors, adding that the yuan will not depreciate continuously.
this might be a trojan horse for China.

China needs to tread carefully with this "internationalization of the yuan " thing

they should continue to push BRICS BANK while also having some skin in the game in the IMF
(09-29-2015 01:02 AM)EVILYOSHIDA Wrote: [ -> ]this might be a trojan horse for China.

China needs to tread carefully with this "internationalization of the yuan " thing

they should continue to push BRICS BANK while also having some skin in the game in the IMF

The U.S. hasn't any intention of giving up its claim to 'exceptional' status and unipolar world policeman, so there's likely nothing it does now with respect to its rivals that is motivated by good intentions.

'Obama' has been the most conniving president in U.S. history; he comes from a family of intelligence officers, much like his predecessor G.W. Bush.

Think of how intelligence officers operate and then the actions of 'Obama' make a lot more sense.

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