The rapidly rising renminbi came of age with the news that it is to be included in the International Monetary Fund’s basket of currencies with Special Drawing Rights (SDR). Its inclusion may sound like a dry technical measure; it is anything but, and it is changing the landscape of global commerce fundamentally.
- First, it means the renminbi is now being accepted as one of the world’s reserve currencies, bringing liquidity to global trade alongside the U.S. dollar, the British pound, the euro and the Japanese yen. The renminbi’s journey to becoming a globally recognized hard currency has begun.
- Second, it represents a significant vote of confidence by IMF economists for China and its path to economic reform. Clearly the IMF accepts the liberalization of the Chinese economy – as set out in our recent white paper – is irrevocable, and is a process that will continue.
The IMF’s decision certainly came at a pivotal moment for China, as the country is experiencing a significant slowdown in growth for the first time since its economic reforms. In 2016 Thomson Reuters FX analysts predict that growth will hit around six percent, while the RMB may depreciate further.
–David Craig, president of Financial & Risk at Thomson Reuters
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