Beginning in October of last year, China’s renminbi was added to the International Monetary Fund’s currency basket known as the Special Drawing Rights, or SDR.
The IMF, founded after Bretton Woods, established the SDR to be its own international reserve asset – what many have identified as world money.
Prior to Chinese inclusion, the elite currency basket was calculated with the U. S dollar, Euro, Japanese yen and British pound sterling. While China joining the SDR may have been largely status-driven at the time, the yuan and the Chinese economy have become open to heightened concern.
Significant worries over debt, wasted investments and threats of sweeping deflation left macroeconomists seeing a Chinese financial crisis on the horizon. Financial commentators ranging from hedge fund manager Kyle Bass to economist Jim Rickards highlight that the Chinese economy is on a dangerous course.
So what does that mean for China and its inclusion with the SDR’s world money basket?
Here’s five things we’ve learned from the Chinese entrance into world money:
1. October 2017 is Crucial
This October, the 19th National Congress of the Communist Party of China will be held. Thousands of lawmakers will gather in Beijing for the Congress. The Chinese Communist Party (CCP) does hold ultimate power, but certain influencers are beginning to rise.
This post was published at Wall Street Examiner on June 26, 2017.