The Positive Credit Impact Of RMB Basket Is Very Large.

Recently, Christine Lagarde, President of the International Monetary Fund (IMF), said in a statement that IMF IMF staff had proposed to include Renminbi in the basket of special drawing rights (SDR).

SDR is an international reserve asset created by IMF, which is based on the basket of currencies. The currency basket includes 4 currencies: the US dollar, the euro, the yen and the pound.

IMF will make a decision on the above issues at the executive board meeting of 30 / November.

Moodie Investors Services Co., Ltd. 23, said that the RMB as a fifth currency into the basket of SDR currencies will have a positive credit impact on China (Aa3/ stability), because it will support China's gradual liberalization of capital account and other market-oriented reforms. It will also encourage wider use of the renminbi in cross border pactions, portfolio investment and bond issuance, thereby reducing potential currency mismatches among Chinese issuers.

In recent years, under the background of steady appreciation of RMB, although currency mismatch has not yet become a problem, under the new market-oriented exchange rate formation mechanism, RMB has not been a problem.

Sometimes it may go down.

Moodie pointed out that in July and August this year, the Chinese government intervened.

The action intensified the market's doubts about China's reform and readjustment of its economic structure.

In October, the Communist Party of China in the fifth Plenary Session of the 18th CPC Central Committee reiterated the goal of gradually liberalising capital account before the 2020 years.

An open capital account can increase the source of funds for Chinese issuers.

And expand the investment channels of Chinese savers, so it has positive credit impact.

However, liberalization of capital account requires simultaneous reform of the financial sector to ease the risk of capital outflow that affects China's credit quality.

In addition, Moodie also believes that the immediate impact of RMB on the basket of SDR currencies may be limited.

Since the total SDR is only $286 billion, the demand for Renminbi generated by the SDR basket is negligible.

Assuming that the weight of RMB in the SDR basket of currencies is 10%-15%, the amount of direct flow to the RMB from September 2016 will be only 290-430 billion US dollars, which is about 0.4% of GDP in 2014 (the basket of SDR currencies will take effect 10 months after the announcement).

The IMF press release explicitly stated that the renminbi meets the "freely available" standard, and the Chinese government has settled all the outstanding operational problems pointed out by the IMF staff in the preliminary analysis in July this year.

In the 8 month of this year, IMF said in a report that assessing the value of the renminbi relative to SDR needs a more "market-oriented RMB exchange rate".

If IMF is to include Renminbi in the basket of SDR currencies, this will be the affirmation of China's exchange rate reform 3 months ago, especially in other areas.