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Economy

Paola Subacchi: Seeing through the SDR hype

The inclusion of the yuan among the currencies that compose the Special Drawing Rights -- the International Monetary Fund's international reserve asset -- is a "milestone" for China, as IMF Managing Director Christine Lagarde said when she presented the executive board's decision on Nov. 30. Indeed, including the yuan, or renminbi, in this group -- the other key currencies are the dollar, the euro, the yen and the pound -- is hugely symbolic for the Chinese leadership.

     The decision recognizes the work that China's monetary authorities have done in the last five years to push the yuan's transformation into an international currency. The outcome of this process has been remarkable. Approximately 25% of China's trade is now settled in its own currency -- the ratio was less than 1% in 2009 -- and the redback is now the fourth most-used currency in international payments. It was No. 12 in 2012.

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