China’s national currency is strengthening steadily against the US dollar in China’s foreign exchange spot market. According to the China Foreign Exchange Trading System, the renminbi surged 62 basis points to hit a record high of 6.3174 against the US dollar on Monday. The yuan has been extending gains versus the greenback in light of the recent statement of the People’s Bank of China. The central bank announced a launch of a free trade project in Shanghai. Thanks to a trial free trade zone, the Chinese nationals will be able to buy foreign assets at markets rates as foreign financial institutions will open their regional offices in Shanghai. This decision proves that the regulator is ready to phase out all administrative barriers restricting the capital flow. Pursuing this policy, the People’s Bank of China enhances yuan’s chances to join the reserve currency basket of the IMF. The Chinese government has met all technical requirements. Analysts of Standard Chartered Plc reckon the chance is almost 90% that the IMF Executive Board is to add the yuan to the reserve currency basket. A well-informed source says that Beijing considers the matter to have been settled and is ready to celebrate its victory. Indeed, the renminbi is widely used as a reserve currency by global financial institutions nowadays. Experts at Merrill Lynch estimate that central banks around the world are currently holding Chinese government bonds worth $80 billion. As a result, the yuan has become the seventh global reserve currency. After the Chinese currency is included in the SDR (special drawing rights), its share in the world reserves could swell notably surpassing that of the pound sterling and the Japanese yen.
