The International Monetary Fund's decision to raise the renminbi's weight in a key global reserve asset marked the steady progress of the renminbi's internationalization, reflecting the currency's growing global heft and the achievement of China's financial opening-up, industry experts said on Sunday.
In the latest valuation review of the Special Drawing Right－an international reserve asset also known as the SDR, the IMF raised the weight of the renminbi in the basket of currencies that make up the SDR by 1.36 percentage points to 12.28 percent, the People's Bank of China, the nation's central bank, said on Sunday.
The SDR valuation review, completed on Wednesday, marked the first review since the renminbi was included in the SDR basket in 2016, with a share of 10.92 percent, the central bank said.
Effective on Aug 1, the weight increase will allow the renminbi to continue to account for the third-largest share in the basket, behind only the US dollar and the euro but ranking higher than the Japanese yen and the British pound.
"The weight increase reflected that renminbi internationalization has made steady headway thanks to China's growing heft in the global economic, trade and financial landscape," said Zhang Xiaotao, dean of the School of International Trade and Economics at the Central University of Finance and Economics.
An IMF statement on Saturday said the updated SDR weights were based on developments in trade and financial markets from 2017 to 2021, with IMF executive directors acknowledging the progress made on financial market reforms in China.
They called for additional efforts to further open and deepen the onshore renminbi market, and some also stressed the need to enhance data transparency, the IMF said.
Reiterating China's commitment to financial market opening-up, the PBOC vowed on Sunday to simplify the procedures for foreign investors to invest in the Chinese market, enlarge the universe of investable assets, improve data disclosure and the business environment, and extend trading hours of the interbank foreign exchange market.
Zhang said more financial reform and opening-up steps will help accelerate renminbi internationalization by facilitating free capital flows and cementing the preferences by global investors for renminbi-denominated assets.
He added that the renminbi's recent depreciation against the dollar is due to short-term shocks, such as a resurgence in COVID-19 cases, and is unlikely to alter the country's long-term development potential or derail the future internationalization of the renminbi.
Yang Haiping, general manager of the Bank of Inner Mongolia's research development department, said the weight rise will help boost the willingness of overseas organizations to hold the renminbi and renminbi-denominated assets, solidify market confidence in the currency, and cushion the pressure of a strong dollar on the renminbi.
Apart from raising the SDR share of the renminbi, the IMF increased the dollar's weighting to 43.38 percent, up by 1.65 percentage points from the last review in 2015.