![\"China-Economy\"](\"https:\/\/nrgibroker.com\/wp-content\/uploads\/2015\/11\/China-Economy.jpg\")
<\/a><\/p>\nThe\u00a0International Monetary Fund\u00a0on Monday approved the Chinese renminbi as one of the world\u2019s main central bank reserve currencies, a major acknowledgement of the country\u2019s rising financial and economic heft.<\/p>\n
The I.M.F. decision will help pave the way for broader use of the renminbi in trade and finance, securing China\u2019s standing as a global economic power. But it also introduces new uncertainty into China\u2019s economy and financial system, as the country was forced to relax many currency controls to meet the I.M.F. requirements.<\/p>\n
The changes could inject volatility into the Chinese economy, since large flows of money surge into the country and recede based on its prospects. This could make it difficult for China to maintain its record of strong, steady growth, especially at at a time when it economy is already slowing.<\/p>\n
China\u2019s leadership has made it a priority to join this group of currencies, naming it in October as one of their highest economic policy priorities in the coming years. The renminbi\u2019s new status \u201cwill improve the international monetary system and safeguard global financial stability,\u201d President Xi Jinping\u00a0of China said in mid November.<\/p>\n
In the months before the I.M.F. decision, China took several actions to make sure that the renminbi was more widely embraced. China did so partly to meet the I.M.F.\u2019s rule that a currency must be \u201cfreely usable\u201d before it can be included in this benchmark.<\/p>\n
China and Britain have sold renminbi-denominated sovereign bonds for the first time in London, which has emerged as Europe\u2019s hub for the currency. Even Hungary has announced plans to issue its own renminbi-denominated bonds as well, while the Ceinex exchange in Frankfurt has begun trading funds this month based on renminbi bonds. Preparations began to trade renminbi-denominated oil contracts in Shanghai, where copper and aluminum contracts are already sold.<\/p>\n
Most important, China began changing the way it sets the value of the renminbi each morning. In doing so, it abruptly devalued the currency.<\/p>\n
The entry itself into the special drawing right is mainly symbolic. But such broader moves toward greater financial transparency and easier trading \u2014 part of the process to meet the I.M.F. requirements \u2014 will have long term effects on the renminbi\u2019s usage.<\/p>\n
\u201cThere\u2019s this obsession with the S.D.R., and it\u2019s completely out of proportion to its economic impact, which is likely to be trivial,\u201d said Randall Kroszner,\u00a0a former Federal Reserve Board governor who is now an economics professor at the University of Chicago. \u201cIt may be that in the drive to get into the S.D.R., they may make changes that make the renminbi more attractive for international market participants.\u201d<\/p>\n