Dundee: ‘China wants yuan and gold to be included in SDR’

Posted: 15th Dec 2014
Author: Willem Middelkoop

According to Dr. Martin Murenbeeld, economist at Canadian Dundee Capital Markets, China wants the yuan and gold to be included in the SDR. In his weekly Gold Monitor, published in December 12, he wrote;

‘.. we fully expect China will demand that both the yuan and gold be included in the SDR-basket when the IMF reviews the composition of the SDR in late 2015’. 

He points to a rather well researched article published by Bloomberg just a day before. Although no mention of gold can be found in this article, it does contain some interesting information pointing towards the preparations to include the Chinese currency into the SDR-basket;

‘For the first time, China has a real shot at getting the International Monetary Fund to endorse the yuan as a global reserve currency alongside the dollar and euro. In late 2015, the IMF will conduct its next twice-a-decade review of the basket of currencies its members can count toward their official reserves. Including the yuan in this so-called Special Drawing Rights system would allow the IMF to recognize the ascent of the world’s second-biggest economy while aiding China’s attempts to diminish the dollar’s dominance in global trade and finance.’ 

In the Bloomberg article an interesting IMF reaction is quoted;

‘there have been a number of developments regarding the RMB’s international use, and the upcoming review would take stock of these developments.’

We know several high level Chinese have been pushing for a broader use of the SDR’s to replace the dollar, for some time now. According to the article Nathan Chow, an economist at DBS Group Holdings who previously worked at the Hong Kong Monetary Authority, said there’s a “very high chance that the yuan will be included in the SDR’

More confirmation can be found in the Bloomberg article;

‘A SDR status  (for the yuan) would be a “relatively easy” way for the world to acknowledge China’s economic ascendancy, said Benjamin J. Cohen, a professor of international political economy at the University of California at Santa Barbara. It overtook Japan to become the world’s second-biggest economy in 2010. “It’s very difficult to imagine they won’t include the yuan in the basket.’

Personally I think gold could be used at a later stage, as a foundation for the SDR to help build confidence in this potential ‘new world reserve currency’.

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