IMF: Market slides won't affect yuan's SDR review

[Copper Catcher]

The International Monetary Fund Managing Director Christine Lagarde has said that China's volatile stock market will not affect the IMF's assessment of whether to include the Chinese yuan in its Special Drawing Rights, or reserve currencies.

Lagarde predicted that China's economy is strong enough to withstand the equity rout, and she played down the declines of the A-share market to date, pointing out they were still up 80 percent on a year ago.

China is seeking to gain the yuan's admission to the IMF’s basket of currencies, making up its SDR, which is now composed of the US dollar, Japanese yen, the British pound and the euro. Lagarde said the fluctuation in China's stock market would not affect the IMF's assessment on yuan's admission.

Media reports reveal that the IMF is scheduled to start discussions in the second half of the year and decide in November.

http://english.cntv.cn/2015/07/30/VIDE1 ... 4642.shtml


Another nail in the US dollar world reserve status comes in November! No surprise.....

[Copper Catcher]

The Rise Of The Yuan Continues: LME To Accept Renminbi As Collateral
http://www.zerohedge.com/news/2015-07-2 ... collateral


China’s Total Gold Holdings Much Higher - Owns Gold In SAFE and CIC

- China revises up its stated gold reserves in bid for IMF membership and reserve currency status
- China announces a 604 tonne increase in gold reserves
- First public disclosure re reserves in since 2009
- China officially owns around 1,660 tonnes of gold reserves - true total figure is likely much larger
- Playing long game - protecting USD reserves and positioning RMB as global reserve currency
- China true gold holdings much higher as also owns gold in SAFE and CIC

20-07-2015_1

China officially revised its gold reserves upward for the first time since 2009 on Friday. The People’s Bank of China (PBOC) stated on Friday that it had added 604 tonnes of gold to its official reserves last month.

Gold is no longer used to back paper and digital money of today, however it remains an important part of monetary reserves internationally. This can be seen in the People's Bank of China's (PBOC) announcement of an increase in their gold reserves.

China’s official reserves are now almost 1660 tonnes of gold. Analysts, including Bloomberg and ourselves, had been expecting a sharp jump to at least 2,000 tonnes and possibly as high as 3,000 or 4,000 tonnes.

It is clear by the secrecy surrounding China’s reserves that they view gold as a vital strategic asset. Chinese gold reserves increased by 57 percent and China’s holdings have now surpassed those of Russia to become the fifth-largest. The U.S. is believed to have the biggest reserves at 8,133.5 tons. The current official holdings rank them as the fifth largest holder of gold in the world (see chart).



Many analysts believe this figure to be an understatement given the enormous volumes of gold that have been passing through Hong Kong - and through Shanghai in more recent years - and the large amounts that have been produced and bought domestically.

It is important to remember that as we have long pointed out two other entities, besides the PBOC, have also been buying gold - the State Administration of Foreign Exchange (SAFE) and the China Investment Corporation (CIC).

Although if the combined holdings of the PBOC, SAFE and CIC were added together, China may well be the second largest holder of gold bullion - after the U.S. - assuming that U.S. gold reserve figures, which have not been publicly audited in over 60 years, are accurate.

It is likely, that in total and between the three China’s financial institutions, China may in fact be holding between 3,000 tonnes and 6,000 tonnes of gold.

China is playing the long game and they could be low balling their total gold holdings - official central bank reserves and non official holdings - in order to maintain confidence in their substantial US dollar holdings and to aid their bid to join the IMF.

China became the world’s second-largest economy in 2010 and has stepped up efforts to internationalize its currency - the yuan. The Chinese are pushing for full convertibility of the RMB and increasing their gold holdings will create confidence in the fledgling reserve currency and aid them in this regard.

China, regardless of its ambitions, is not currently in a position to challenge the the dollar’s reserve currency supremacy. The absence of a deep and liquid bond market is one impediment that they need to overcome on this regard.

On the other hand, it certainly is strong enough to take its place at the IMF and have the yuan included in the currency basket that makes up Special Drawing Rights (SDRs).

Whoever has the gold makes the rules. While gold is denigrated at every opportunity by some commentators - frequently Keynesians anti gold ideologues - it is clear that the true power-brokers in the world - leading international banks and central banks - still adhere to that adage.

To demonstrate its fitness to join the IMF, China must demonstrate its financial and monetary strength by declaring sufficient gold reserves which it has now done.

The bloated, debt-based international monetary system faces huge challenges and the scale of debts globally could indeed lead to collapse. In time China may disclose its true gold holdings and partially back its currency with gold to discourage capital flight.

Gold is no longer used to back the trillions and trillions of paper and digital money of today, however it clearly remains money contrary to assertions to the contrary. Gold bullion remains a substantial part of central bank reserves in the U.S. and Europe.

The PBOC gold announcement is the continuation of the trend of China positioning the yuan as global reserve currency. China’s gold reserves remain miniscule as a percent of their massive $3.7 trillion foreign exchange reserves – less than 2%. In marked contrast to the U.S., Germany and even France and Italy when gold’s share of national forex reserves is over 70%.

We would not be surprised if the PBOC begins to accumulate a minimum of 100 metric tonnes in gold reserves a month going forward as the Russians have done in recent years. Alternatively, they may elect to continue accumulating gold bullion quietly through SAFE and the CIC - indeed they have been buying hundreds of gold mines in South America, Africa and internationally in recent years - likely securing another important source of supply.

Central banks internationally still hold physical gold as financial insurance. Investors and savers should do the same and have an allocation to gold bullion outside of the banking system, in the safest vaults in the world.



Source: http://www.zerohedge.com/news/2015-07-2 ... -and-cic-0

[johnbrickner]

Thanx CC. Brings me current with the China Syndrome.

[Copper Catcher]

Things change fast.......

The IMF has delayed its decision on including The Yuan in The SDR...
•*IMF ISSUES REPORT ON CRITERIA FOR YUAN RESERVE-CURRENCY STATUS
•*IMF STAFF PROPOSES DELAYING ANY CHANGE IN SDR TO SEPT. 2016
•*IMF SAYS `SIGNIFICANT WORK REMAINS' ON REVIEW OF YUAN IN SDR
•*IMF: OPERATIONAL ISSUES MUST BE RESOLVED IF YUAN PART OF SDR
•*IMF: YUAN MADE `SUBSTANTIAL PROGRESS' ON INTL USE SINCE 2010

As Bloomberg reports, though there is a delay the endgame remains in sight...


The International Monetary Fund said the yuan trails its global counterparts in major benchmarks and that “significant work” in analyzing data is needed before deciding whether to grant the Chinese currency reserve status.

IMF staff members also opened the door to a possible delay in any approval with a proposal to postpone by nine months, until September 2016, the implementation of a change in the basket of currencies that make up the lender’s Special Drawing Rights,according to an update on the five-yearly review released Tuesday. The IMF said postponing the change would make the transition to a new basket smoother.

The report suggests that while approval by the IMF board isn’t yet assured, it’s within reach, and the decision will come down to more than just the staff’s assessment. China has been pushing for the yuan to join the dollar, euro, yen and pound in the SDR basket; while countries such as France have welcomed China’s push, the U.S. has urged the nation to keep moving toward a flexible exchange rate and undertaking financial reforms.

“The ultimate assessment by the board will involve a significant element of judgment,” the IMF report said.

The postponement sets the stage for the IMF to add the SDR to the yuan just before Chinese President Xi Jinping hosts a meeting of Group of 20 leaders next year, said David Loevinger, managing director of emerging-markets sovereign research at asset manager TCW Group Inc. in Los Angeles.

“The end game is obvious,” said Loevinger, former senior coordinator for China affairs at the U.S. Treasury Department. “If the Chinese make this a priority, it’s pretty certain President Xi will have his deliverable at the G-20.”

[johnbrickner]

Can we play another What If?

What if the yuan gets accepted as reserve currency status 13 or 14 months down the road? What will he effect be on world economy, the U$D, and how will the rest of the world react?

This recently to contemplate:

_83913103_83913102.jpg (33.47 KiB) Viewed 713 times

http://www.bbc.com/news/world-asia-33307314

[Copper Catcher]

No SDR For You: IMF Tells China To Wait At Least One Year Until Reserve Basket Inclusion
http://www.zerohedge.com/news/2015-08-1 ... -inclusion

I wonder when China will announce it's real gold holdings number to the world? Perhaps after a world economic collapse? Timing is everything....

[Copper Catcher]

IMF poised to put Chinese yuan in elite currency basket

The International Monetary Fund is expected to approve inclusion of China's yuan in its SDR basket of elite currencies on Monday, rewarding Beijing's strong pursuit of the global status.

The IMF executive board is scheduled to meet Monday to decide on the recommendation by staff experts earlier in November to include the yuan, also known as the renminbi, alongside the US dollar, euro, Japanese yen and British pound in the grouping.

While not a freely traded currency, the SDR (special drawing right) is important as an international reserve asset, and because the IMF issues its crisis loans -- crucial to struggling economies like Greece -- valued in SDRs.
China, now the world's second-largest economy, asked last year for the yuan to be added to the grouping of world reserve currencies, but until recently it was considered too tightly controlled to qualify.

It is extremely rare that the executive board, which represents the IMF's 188 member nations, opposes the recommendation of its own experts. IMF Managing Director Christine Lagarde said in mid-November that she supported the experts' finding that the yuan had met the requirements to be a 'freely usable' currency" -- a key hurdle for SDR status.

If accepted, the decision would not take effect before September 30, 2016, to allow users more time to prepare. The last time the SDR basket was modified was in 2000, when the euro replaced the German deutschemark and the French franc.

The remaining question is the yuan's weight in the basket. It could be 10 percent to 16 percent, but the lower estimate is more likely due to the Chinese currency's limited convertibility.

The basket composition is reviewed every five years. At the last rebalancing in 2010, the dollar accounted for 41.9 percent, the euro 37.4 percent, the pound 11.3 percent and the yen 9.4 percent.

That weighting revision was based on the value of the exports of goods and services by country or currency zone, and the amount of reserves denominated in the respective currencies held by other IMF members.

- Diplomatic success -

The entry of the yuan is, above all, a major diplomatic success for Beijing, which will see its money graduate to the inner circle of the world's most important currencies.

The vote of the United States, the largest IMF stakeholder, will be closely watched, as will US political reactions. US officials have long accused China of keeping the yuan artificially low to gain a trade advantage, making its exports relatively cheaper.

The US Treasury Department, in an October 19 report, said that the yuan "remains below its appropriate medium-term valuation."

Paradoxically, China's unexpected devaluation of the yuan last August received good marks from the IMF because it reinforced the currency's movements with market forces and opened the door to future revaluation.

Beijing on Wednesday announced an initial group of foreign central banks has been allowed to enter the Chinese currency market, which likely will promote further internationalization of the yuan in global trading.

Credit rating firm Fitch says it does not expect the yuan's inclusion in the IMF basket "to lead to a material shift in demand for renminbi assets globally in the short term." However, it said, over time the emergence of the yuan as a global reserve currency could support China's credit rating.

An IMF decision to include the yuan among its elite currencies risks angering some lawmakers in the US Congress amid fierce maneuvering for the 2016 presidential election.

Congress, for example, has repeatedly refused to ratify a 2010 IMF reform that would give greater weight to the emerging-market powers, the so-called BRICS - Brazil, Russia, India, China and South Africa.

http://news.yahoo.com/imf-poised-put-ch ... 07597.html

[68Camaro]

Interesting, thanks - I missed this.

[johnbrickner]

I've been reading about the "experts" and IMF Director agreeing China meets the requirements. The US can only resist the will of China and the other Bricks err, Brics for so long. Our allies can only go along with our friendly persuasion 'till it becomes to painful to not to join the rest of the world economically and leave the Empire's primary influence. These are times that reflect a major shift in the world's doings, however slow it may go in our eyes.