Move would increase use of reserve unit
The International Monetary Fund (IMF) should create a digital version of its global reserve currency that could be more widely used across the world's financial markets and payment systems, a senior Chinese central bank researcher said on Tuesday.
Yao Yudong, head of the People's Bank of China's Research Institute of Finance and Banking, said in a column in the State-backed Shanghai Securities News that the eSDR - the electronic version of the IMF's Special Drawing Rights (SDR) - would help address flaws in the current global monetary system.
Additionally, the role of the SDR should be expanded, Yao said, echoing suggestions made by central bank Governor Zhou Xiaochuan in 2009.
His proposals include establishing a settlement system between the SDR and other currencies, and promoting the use of the SDR in global trade, financial transactions, commodities pricing and bookkeeping.
SDRs are backed by a basket of major currencies and commonly used as the unit of denomination for financial arrangements between the IMF and its members, which include development financing and emergency loans to countries with liquidity problems.
Yao says the SDR basket should also include currencies of all major economies, whose GDPs should be taken into account in setting the currencies' weightings.
The opinion column comes as China looks set to win approval for the yuan to be included in the SDR currency basket after years of lobbying, seen as a major diplomatic victory for China as it tries to increase its global clout.
However, Yao's comments highlight a potential source of tension; while many IMF officials see SDR inclusion as driving reforms in China, China sees inclusion as a step toward reforming the IMF, which some see as held hostage to the interests of developed economies.
"China needs to study more closely profound issues in global economic and financial fluctuations, and be more forward-looking in terms of technological trends so as to have first-mover advantage, and to some degree, become more proactive in setting the rules of the global game," Yao said.
