The International Monetary Fund said China’s market turmoil won’t affect the nation’s bid this year for reserve-currency status from the lender, after the government intervened with a barrage of measures to stem a plunge in stocks.
The IMF’s review is focused on “a well-defined set of criteria,” including longer-term efforts to open the nation’s financial system and develop capital markets, fund spokesman Gerry Rice said Thursday at a regular press briefing in Washington. “It’s not something that would be decided on the basis of short-term market movements,” he said.
The fund’s comments may damp speculation that China’s market intervention is harming chances that the IMF will approve adding the yuan to its Special Drawing Rights basket of currencies alongside the dollar, euro, yen and pound. China’s request to join hinges on whether the yuan, officially called the renminbi, is deemed “freely usable.”
“The financial-market reforms in China are advancing, and the renminbi internationalization is continuing,” Rice said. “The recent market volatility is a separate issue from the discussion of the renminbi and the discussion of the SDR.”
The IMF, which reviews the composition of the SDR basket every five years, plans an informal board discussion on the issue by the end of this month, followed by formal talks in November, Rice said. The fund rejected China’s bid to include the yuan during the last review in 2010.
Olivier Blanchard, the IMF’s chief economist, said earlier this month that China’s stock-market drop was “very much a sideshow” that “doesn’t reflect on the fundamentals of China.”