BEIJING — The International Monetary Fund’s decision to add the Chinese renminbi to its list of reserve currencies was hailed here Tuesday as an important step in China’s quest to play a bigger role in the global economy, but it was also recognized as a challenge to the country’s policymakers to keep China’s slowing economy on course.
The IMF’s long-sought seal of approval was seen in China as a sign of how far the country has come and a reminder of how far it still needs to go in terms of liberalizing its currency and markets.
The IMF decision “shows international society’s recognition of China’s economic development, its reform and opening up, especially in the financial field,” said Zhao Xijun, deputy dean of Renmin University’s School of Finance in Beijing. “It shows that China is on the right track.”
The Global Times, a newspaper known for its strident nationalism, called the decision a “victory” that amounted to a “coronation ceremony” for China as it took its place in the new world order. The state-backed China Daily said the move was met with “widespread applause.”
The IMF announced Monday afternoon that the renminbi, also known as the yuan, will join the U.S. dollar, the euro, the British pound and the Japanese yen as one of the currencies it uses to denominate loans, a move the Chinese have long desired.
In a statement released Monday, Christine Lagarde, managing director of the IMF, called its addition “an important milestone in the integration of the Chinese economy into the global financial system” and a recognition of “the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems.”
“The continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy,” she said.
The move, effective October 2016, will broaden the use of the renminbi in trade and finance. Analysts say it’s a step toward encouraging its global use, but banks could remain reluctant to hold the currency unless Beijing pushes ahead with deeper financial reforms.
The news also carried symbolic weight.
“It is a historic moment in the annals of international finance for an emerging market economy’s currency to be anointed as one of the world’s major reserve currencies,” Eswar Prasad, a senior professor of trade policy at Cornell University and a former head of the IMF’s China division, said in an e-mail.
But Chinese experts cautioned that the country needs to push ahead with economic reform at home in order to be a responsible actor abroad.
In a statement published online, the People’s Bank of China called the IMF decision “an acknowledgement of China’s economic development, reform and opening up,” but noted that it “also means that the international community expects China to play a bigger role in the international economic and financial system.”
That sentiment was echoed by Jin Liqun, president-designate of the Asian Infrastructure Investment Bank, who told reporters Tuesday that China must push ahead with economic reform.
“Once the Chinese currency becomes one of the currencies in the basket, it is a huge responsibility on the part of the government to make sure the currency will be stable and the economy will be open enough to deserve the status of an international reserve currency,” he said.
First among those responsibilities will be effectively managing the currency.
“Volatility will be strong, and we have to see how companies as well as the Chinese government deals with that,” Joerg Wuttke, head of the European Chamber of Commerce in China, said Tuesday.
“In a way, the inclusion is also a challenge to China,” he said. “But it’s a natural step.”
Simon Denyer, Gu Jinglu and Xu Jing reported from Beijing. Daniela Deane contributed from London.