http://www.afr.com/news/world/china-yuan-steps-up-to-global-stage-20151201-glc7c8
IMF agrees to include China's RMB in benchmark SDR currency basket. This is really a big time for China's RMB. It makes Chinese assets become a bit more attractive. One analysis pointed out that China's RMB getting into SDR means China's RMB will depreciate to almost 7:1 USD. In the international business market, the depreciation would definitely bring benefits to Chinese export. And China's RMB may be more important in international trades.
6 comments:
This sounds like a great a news for the Chinese economy in trying to internationalize its currency. Increasing exports and thereby earning foreign currencies will surely help China get back on its feet sooner, after the economic slowdown in the country. Also, it will be interesting to see how the Yuan moves up in the SDR basket in an attempt to compete with the US dollar in the next couple of years.
It seems like this move has been a long time coming. With China's economic power, they should naturally be considered a part of the currency basket. However, further depreciation against the dollar could have negative implications for US/China business relations. I force even more offshoring and capital flows from the US to China as Americans gain even more purchasing power of Chinese goods.
Obviously, this is good for the Chinese economy. Chinese companies will be able to export more because their goods are cheaper. This may help China's growth increase back into the double digits that it used to be.
China's export will definitely benefit from this decision to be included in the currencies basket, which will bring the country's economy back on its feet after the slowdown. However, China has been one of the strongest exporting countries, so with this further currency depreciation, how will the value of Yuan be affected in the future?
This would be huge for their economy and the every day person. In the short run I would expect the Chinese domestic goods and services to be very cheap and boost their economy. It would be interesting to see how this will affect the international tourism industry because the Chinese are already starting to travel and depreciating their currency will allow them to exchange foreign currency for more than in the past.
It would definitely make Chinese Yuan more competitive and valuable than before, but I hope the Chinese economy can sustain the growth and survive the financial crisis in the furture.
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