The yuan took on the mantle of a global reserve currency Saturday, a milestone that is seen breathing life into China’s bond markets by prompting estimated inflows of as much as $1 trillion over the next five years.
The currency’s entry into the International Monetary Fund’s Special Drawing Rights -- alongside the dollar, euro, pound and the yen -- comes amid China’s efforts to boost its international usage and ambitions of providing an alternative to the dollar. Describing the inclusion as a “historic milestone,” IMF Managing Director Christine Lagarde said in a statement Friday that it reflects the progress that the Asian country has made in reforming its financial systems and liberalizing markets.
“SDR entry will pave the way for closer interaction between China’s capital market and that of the rest of the world,” Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore, said on Saturday.
