The US and China have been involved in currency wars for quite a long time. However, the confrontation has moved into the passive phase lately. Meanwhile, the US Treasury is keeping a close eye on the Chinese yuan, despite the statement of its unpromising future.
The Chinese yuan is "quite a way" from becoming a global reserve currency despite its inclusion in the International Monetary Fund's currency basket, and China needs further reform to reach that goal, US Treasury Secretary Jack Lew said.
From October 1, the yuan has joined the dollar, euro, yen and pound sterling in the "special drawing rights" basket that forms the IMF's unit of account. The IMF reviews the SDR’s currency composition every five years.
Since 1990, the basket has consisted of the US dollar, Japanese yen, pound sterling, and the euro. These currencies are most used in international payments. However, the Chinese yuan became the fourth most-used currency in global payments surpassing the yen in August 2016.
After that the Executive Board of the IMF approved the extension of the current SDR valuation basket to September 30, 2016 so that the system’s participants could adapt to the inclusion of the yuan. .
The IMF decided to include China's currency in its basket in November 2015 saying the yuan meets its key criterion that reserve currencies must be freely usable. Apparently, the United States does not think so. However, until today the US Treasury has not criticized the Chinese currency.
Lew said China still has work to do on economic reform though the US recognizes "enormous" change in the country over the last 10 years.
