Why China’s Bid to Join the Elite of Global Finance Will Almost Certainly Be Successful This Year

There are many steps China has taken to get into the U.S.-led International Monetary Fund. One of the key pieces of the puzzle will likely come to fruition later this year.

A visitor is checking bottles of Champagne at the Vinexpo Asia Pacific in Hong Kong, on May 27, 2014. On the international financial change, China is very close to pop the Champaign at the end of the year. PHILIPPE LOPEZ/AFP/Getty Images

There are many steps China has taken to get into the U.S.-led International Monetary Fund. One of the key pieces of the puzzle will likely come to fruition later this year: China’s inclusion in the fund’s own reserve currency, the Special Drawing Rights (SDR). Right now, these drawing rights are made up of the U.S. dollar (47 percent), euro (34 percent), pound sterling (12 percent), and Japanese yen (7 percent).

As usual with the IMF, this is more a matter of status rather than practical value—there are only $285 billion worth of SDR in circulation worldwide. In addition, the SDR isn’t real money but merely the claims on an amount of dollars, euros, pounds, and yen—if they should ever be exercised.

It should increase the demand of yuan worldwide as a reserve currency.

— James Nolt, World Policy Institute