SDR an effective tool to resist economic risks

Yi Gang, deputy governor of the People's Bank of China (PBOC), speaks at a forum during the International Monetary Fund (IMF) and World Bank Spring Meetings in Washington D.C., capital of the United States, April 21, 2017. The PBOC, China's central bank, could play a role in promoting the wider use of Special Drawing Rights (SDR), said Yi Gang. Photo: Xu Yifan/

As how to effectively tackle economic risks has always been a major global issue, it has become one of the main tasks for the international community to further optimize the current international monetary system so as to upgrade its risk-resistance ability. Special Drawing Rights (SDR), as a unit of account, financial instruments and official reserves, can play a significant role in this context, according to Yi Gang, deputy governor of the People's Bank of China (PBOC).
SDR, as a portfolio of currencies of several countries, can help to diversify risks and provide better stability than single-currency investments and guarantee better investment return. Meanwhile, it also helps to relieve the pressure of reserve currency-issuing countries, better regulate the large amount of capital flows among new economies, and improve the global financial system, said Yi when addressing a forum during the International Monetary Fund (IMF) and World Bank Spring Meetings last week.
He said SDR can play a significant role in resisting financial risks in a number of ways. Besides enhancing stability and diversifying risks, it can also tackle risks through regional agreements and bilateral agreements between central banks. International Monetary Fund (IMF), the creator of SDR, is also an important strength in reducing financial risks and enhancing financial safety.
But according to Yi, there are still challenges on the SDR market which include a lack of liquidity, high transaction costs and settlement difficulties. The Chinese authorities will help develop the market by building its infrastructure and facilitating transactions, Yi said.
The use of SDR in accounting, market transaction and as international reserve has been improved since the Chinese yuan was included in the SDR basket in 2016, making it the fifth international currency after the euro, dollar, yen and British pound.
The inclusion of Chinese yuan into the SDR basket improved the yuan’s international reputation and marked a step further in the county’s effort to push the currency’s internationalization. In August, the World Bank was approved as the first SDR-denominated bonds issuer in China.
The SDR, created by IMF in 1969, is used in international payments and to supplement its member countries' official reserves. Member countries can use SDR to balance their balance sheets.
According to an IMF report on central bank holdings of the Chinese currency, central banks held $84.51 billion in yuan reserves in the fourth quarter of 2016.

Related Stories
Share this page
Touched Sympathetic Bored Angry Amused Sad Happy No comment

La Plantation—an open theater for acoustic music loversXi, Trump discuss North Korean nuclear crisis in telephone callUS can benefit from Belt and Road initiative: opinionXiongan County: Dream and anxietyUS discriminating against Chinese firms, says TCL bossChina’s bike-sharing craze#Caixin Weekly#CCTV's use of 'Taipei, China' in reports sends political signal, triggers debateA look into Xiongan New AreaBeijing moves to deflate ‘school district housing’ bubbleCorruption-themed TV drama causes sensation in China
< Prev Next >