IMF’s extension does not ‘prejudge’ yuan inclusion

The change would make it more hard to levy high tariffs on Chinese goods. And yesterday, JR’s subscribers saw another victor – to the tune of 116.6% in tracked gains – in Duke Energy (DUK).

But much of the debate on both counts lacks complete context.

The International Monetary Fund did note lingering concerns, however.

The nine-month extension is expected to facilitate the continued smooth functioning of SDR related operations and responds to feedback from SDRs users on the desirability of avoiding changes in the basket. A decision on the yuan is expected in November.

The devaluation may ensure there’s enough time for the emotions to ebb before the Xi-Obama summit, said Arthur Kroeber, Beijing-based managing director at GaveKal Dragonomics, an independent global economic research firm. This argument runs the risk of misinformation. Hence the Chinese investors are seen to be a bit hesitant in investing in the stock market.

The key issue is what constitutes currency manipulation.

In Hong Kong’s offshore market, the freely traded yuan fell 0.08 percent to 6.4465 per US dollar as of 4:51pm, according to data compiled by Bloomberg. China is not among the participating countries but could join the agreement in the future. The currency tumbled for three days, then stabilized Friday.

In many cases Beijing has sought to adjust the global order rather than adapt to it, such as in creating its own development bank and pushing bilateral currency agreements with trading partners rather than working through multinational groups.

Unlike the other currencies in the basket, the yuan does not trade freely.

As the yuan’s fall broke a rally in the Standard & Poor’s 500 Index and prompted a commodities selloff, some US politicians were quick to label China a currency manipulator and raise fears of a new foreign-exchange war.

The United States is the single biggest source of funds for the IMF.

There is now a lot of talk about a new normal in China.

The economists affirmed that the yuan is on track to become a major reserve currency in the coming decades, but the timing depends on the rapid expansion of China’s currency, bond and derivatives markets. They can be held and traded only by central banks and a handful of other authorised institutions. Oil accounts for 7% of the country’s exports.

So, what has all of this recent currency tampering done for China so far?

The PBOC will have to delicately manage the implications of last week’s decision as it seeks to rebalance China’s economy, as well as contain any potential flight of capital.