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RMB inclusion gets support from IMF head, US

China’s bid to have the renminbi included in the IMF’s Special Drawing Rights basket now has support from the head of the IMF and the US Treasury Secretary.

In a statement issued over the weekend, Christine Lagarde, IMF managing director, said in a statement that the RMB meets the requirements to be a “freely usable” currency.

“Accordingly, the staff proposes that the Executive Board determine the RMB to be freely usable and include it in the SDR basket as a fifth currency, along with the British pound, euro, Japanese yen, and the US dollar.

“The staff also finds that the Chinese authorities have addressed all remaining operational issues identified in an initial staff analysis submitted to the Executive Board in July.

“I support the staff’s findings. The decision, of course, on whether the RMB should be included in the SDR basket rests with the IMF’s Executive Board.”

The IMF will consider the issue on November 30, she added.

Provided the RMB meets the IMF’s criteria, the US will support its inclusion in the basket, US Treasury Secretary Jack Lew told Chinese officials on the sidelines of the G-20 conference, Reuters reported.

If the RMB is included, the new basket of currencies would take effect on October 1, 2016.

“Even if the RMB gets a 5% allocation in the basket, a lot of central banks and institutional investors will find they are underweight China’s currency and start to seriously consider allocating to RMB fixed income,” said Raymond Gui, portfolio manager at Income Partners, in a previous interview.

Part of the Mark Allen Group.