(Source: Associated Press/AP Online)
By ELAINE KURTENBACH
NANJING, China - Financial leaders of the Group of 20 top economies appeared to reach informal agreement Thursday on the need for China's currency to have a wider role in global finance, but not as a substitute for the U.S. dollar.
French Finance Minister Christine Lagarde said the daylong meeting agreed the G-20 should study including China's yuan in the basket of currencies that sets the value of the International Monetary Fund's SDRs, or Special Drawing Rights - a quasi currency created by the IMF that is used in dealings with and between member governments.
"We raised with our Chinese friends the idea of including the yuan, under conditions and a time frame to be agreed upon," Lagarde said. "From right now we will start work on broadening the basket of currencies." The basket now includes the dollar, Japanese yen, euro and British pound.
Including the yuan would underline China's increased clout in the global economy and finance after it last year overtook Japan to become the second-biggest economy. It might also serve as a carrot that other G-20 members hope will encourage Beijing to relax controls that limit the Chinese currency's appreciation.
Since the gathering in the eastern Chinese city of Nanjing was not an official G-20 meeting, there was no formal agreement, Lagarde said. She also clarified there was "no suggestion whatsoever that the dollar be replaced by SDRs," an option that has been raised by China as a way of reducing global reliance on the dollar for trade and as a reserve currency.
"There is recognition that the dollar plays a critical role and will continue to do so," Lagarde said.
SDRs are allocated by the IMF based on each country's voting rights in the organization and the fund acts as a middleman between countries that want to exchange them for freely traded currencies.