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Economy

Alicia Garcia-Herrero: The yuan's SDR entry is more symbolism than substance

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Will the yuan's new status as an IMF reserve currency act as a catalyst for capital flows into China?   © Reuters

The yuan's official entry into the International Monetary Fund's basket of reserve currencies on Oct. 1 raised expectations that central banks all over the world would be scrambling to stock up on Chinese money. But the reality is far from that.

First, central bank purchases of yuan to comply with the Special Drawing Rights basket are relatively tiny, equivalent to just $29 billion. This is because even though the yuan is the third-largest currency in the SDR basket behind the U.S. dollar and the euro, with a nearly 11% weighting, the basket itself represents a very small part of foreign exchange reserves -- just 0.3% of the global total.

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