Chinese Yuan To Join IMF Reserve Currencies

The International Monetary Fund has announced that China's currency the yuan will be included in its group of reserve currencies.

The yuan, also known as the renminbi, will join the likes of the US dollar, the British pound and the euro in the basket known as the Special Drawing Rights.

Reserve currencies are those included in loans distributed by the IMF.

It is considered a political victory for the Beijing government, which sees it as a recognition of China's economic power.

China has undertaken a number of reforms in the last few months in an effort to improve the yuan's prospects with the IMF.

In August, China decided to devalue the yuan, bringing it more in line with market forces and suggesting the currency will be less tightly controlled.

The IMF requires currencies included in the Special Drawing Rights to be "freely usable" and traded widely in foreign exchange markets.

Christine Lagarde, managing director of the IMF, said: "The addition of the renminbi is a recognition of the significant reforms which have been conducted, of the significant opening up of the Chinese economy, of the financial, more market-driven principles that are being used by the Chinese authorities going forward."

The yuan will have a 10.92% share of the basket when it joins in October 2016.

The US dollar currently makes up the largest portion with 41.9%, which is not expected to change significantly when the yuan is included.

However, the weighting of the euro, sterling and yen will be lowered.