RMB may make SDR a better stabilizer

As to the second view, it fails to see the potential role that a more diversified and better representative SDR may play amid the mounting global financial uncertainties.

Among all the causes of the global slowdown, the United States' pending decision to raise interest rates has already sown significantly increased global financial market volatility, and its implementation will produce tremendously disruptive moves in capital flows and asset prices.

And as the US adjusts its monetary policy according to its domestic economic conditions, it is more than likely that other countries, especially developing ones that have to finance domestic investment projects with international capital, will bear the brunt of the resulting volatility in the global financial market.

Admittedly, the inclusion of the Chinese renminbi in the SDR is not a direct answer to the excessive dominance of the US dollar in global financing and trade, which far exceeds the US' share in the world economy. And the IMF can do little about this reality, so the move to make the SDR more diversified and better representative is of only symbolic importance for the moment.

But if the inclusion of the Chinese currency in the SDR is viewed as the end of the beginning, rather than the beginning of the end, its potential to accelerate reforms not only in China's financial and economic systems but also in the way that the global financial system is governed will make it a move of substantial and far-reaching significance.

Domestically, a more internationalized currency will make financial reforms more urgent than ever to enhance the competitiveness of domestic financial institutions and better serve the real economy.

Internationally, a better representative SDR will equip the IMF with a viable tool to better explore ways for it to play a greater role in stabilizing the global economy by mitigating the impact of global financial market volatility on underrepresented developing countries.

So while the US is fueling uncertainties around the world by still dragging its feet over abandoning zero interest rates, the IMF's inclusion of the renminbi in its SDR basket of currencies will add some weight to the side of certainty.

The author is a senior writer with China Daily.

zhuqiwen@chinadaily.com.cn

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