The International Monetary Fund on November 30 added the Chinese yuan to its Special Drawing Rights (SDR) basket of reserve currencies – which currently includes the US dollar, the euro, the UK pound and the Japanese yen – effective from October 2016. The move confers international status on the currency at a moment when the Chinese government has started to ease rigid exchange rates and financial restrictions. The yuan will have more weight than either the yen or the pound, but a freely traded yen will open Chinese markets to more volatility and pose the risk of capital flight.
China now accounts for 15% of world gross economic output. China’s economy should expand by 6.9% in 2015. However, the Organisation for Economic Co-operation and Development predicts a gradual slowdown, with expansion of 6.5% in 2016 and 6.2% in 2017. Chinese exports increased from 2010 to 2014, from $1578bn to $2343bn, as have imports, from $1394bn to $1962bn.