SDR currency basket is a Special Drawing Right (SDR), also known as "paper gold", which is allocated by the International Monetary Fund according to the shares subscribed by member countries, and can be used to repay IMF debts and make up the balance of payments deficit between member governments.

when a member country has a balance of payments deficit, it can be used to exchange foreign exchange with other member countries designated by the IMF to pay the balance of payments deficit or repay the IMF loan, and it can also serve as an international reserve like gold and freely convertible currencies. Because it is a supplement to the original ordinary drawing rights of the International Monetary Fund, it is called Special Drawing Rights

The significance of RMB's joining SDR:

1. The adoption of this resolution is another event known as going down in history for China, which will have an important impact on China's financial reform and the trend of RMB exchange rate. At the same time, the RMB will become the fifth SDR basket currency alongside the US dollar, euro, pound and yen.

2. For China, RMB's entry into SDR is not only the IMF's recognition of RMB's internationalization process, but also China's commitment to continue to promote gold reform, including capital account opening.

3. RMB's entry into SDR will boost the opening of capital account

4. RMB's entry into SDR will be interpreted as an official endorsement of RMB as a freely usable currency by IMF, and it also marks that China's increasingly prominent importance in the international financial market has been recognized internationally, which will further promote China's domestic financial reform and capital account opening process. ?

Extended information:

Risks arising from RMB's entry into SDR currency basket

1. From the perspective of interest rate,

RMB's inclusion in SDR currency basket requires RMB's interest rate to be more market-oriented, which also means that the government's interest rate regulation space may be narrowed in the future.

in the future, if inflationary pressure rises, the tightening of monetary policy may cause major financial institutions such as commercial banks to raise interest rates and compete for funds, which may increase the debt cost of commercial banks and make commercial banks face operational difficulties. It does not rule out the risk that some small commercial banks will face unsustainable operations.

2. From the perspective of exchange rate,

RMB may continue to force its market-oriented reform to accelerate further after being included in the SDR currency basket, but it remains to be seen whether the RMB exchange rate is close to the equilibrium level. If the market-oriented reform of RMB exchange rate needs to be further promoted in order to maintain its competitiveness in the SDR currency basket in the future, then the RMB exchange rate may have the risk of uncertainty.

3. From the perspective of systemic risk,

may lead to a larger cross-border flow of capital, and then increase the systemic risk by affecting the stock market, the property market and other channels. If the domestic and international environment fluctuates greatly in the future, the funds in the stock market or real estate market may accelerate the cross-border flow, which will have a negative impact on the financial market and macro-economy.

Baidu Encyclopedia-Special Drawing Rights

Baidu Encyclopedia-RMB Joining SDR

People's Network-Positive Significance and Potential Challenges of RMB Joining SDR