Advertisement
Advertisement
Currencies
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
Premier Li Keqiang, right, greets US Treasury Secretary Jack Lew before their meeting in Beijing. Photo: Reuters

China’s yuan ‘not ready’ to join IMF basket of currencies, says US

Treasury Secretary Jack Lew also softens stance on new China-led development bank, saying he was ready to welcome new lender if it adopts high standards of governance

Currencies

The United States feels China’s yuan does not yet meet the standards for inclusion in the International Monetary Fund’s basket of global currencies, Treasury Secretary Jack Lew said on Tuesday.

He also said Washington was “ready to welcome” the China-led Asian Infrastructure Investment Bank, backing off from tougher early resistance to the new development institution.

The yuan’s inclusion in the basket, which defines the value of the IMF’s reserve assets, would add to China’s global status while encouraging more central banks to hold the currency.

Currently the basket includes the dollar, the yen, the euro and the pound, and the IMF is reviewing the composition of the basket this year.

Officials at the international lender look for a currency to be used heavily in international trade as well as freely convertible. Lew said that China had more work to do.

“While further liberalisation and reform are needed for the [yuan] to meet this standard, we encourage the process of completing these necessary reforms,” Lew said in a speech at the Asia Society Northern California in San Francisco.

The yuan is already the world’s fifth most-used currency in trade and Beijing has made almost weekly strides this year in introducing the infrastructure needed to float it freely on global capital markets.

Lew, who was returning from a trip to Beijing where he met with Chinese officials, repeated the US view that China appears to have stopped intervening to weaken its currency.

But he said the true test of whether China had shifted policy would come when market pressure increased for the yuan to strengthen.

“We expect China to continue to refrain from intervention across different market conditions,” he said.

Lew also said that the China-led Asian Infrastructure Investment Bank needed to “share the international community’s strong commitment to genuine multilateral governance and decision making and ever-improving lending standards and safeguards”, according to his prepared speech.

China and 20 other countries signed a memorandum of understanding to establish the Beijing-headquartered bank in October.

Washington, worried about a China-dominated lending institution cutting into the work of the World Bank and Asian Development Bank, where the US is the leading voice, at first sought to persuade its allies to hold off from joining the banks.

Lew said Washington stood ready to welcome the China-led development bank as long as it complemented existing institutions and adopted high governance standards.

“I was encouraged by my conversations in Beijing in which China’s leaders made clear that they aspire to meet high standards and welcome partnership,” Lew said.

In a wide-ranging speech that touched on trade, regulations and international finance, Lew also warned China against blocking foreign technologies, saying this could damage Sino-US relations.

 

Post