On the last day of November, 2015, the IMF’s Managing Director, Christine Lagarde, released a statement in Washington announcing that IMF Executive Board decided to include the Chinese renminbi in the Special Drawing Rights’ (SDR) valuation formula with a weighting of 10.92%, ranking third in the new SDR basket. This means the renminbi has become the first currency in the emerging market countries that is included in SDR basket. Although the renminbi’s inclusion into the “basket” will not take effect until October, 1st, 2016, this vote of the IMF Executive Board has indicated that the most important step of this important long-awaited event in the global financial governance and reforms has been taken and completed ultimately.

Firstly, the inclusion of the renminbi into the “basket” is an important milestone in the integration of the Chinese economy into the global financial system and it is also the recognition of the significant reforms which have been conducted in the past years, of the Chinese currency, and of the Chinese financial system. This is in accordance with the natural development and the general trend of the event. China is the world’s second largest economy and the largest goods trading nation in the world, so it is the demand of the Chinese economy and its financial development, as well as the requirement of the global economic development and the international currency system’s reform that, RMB should become the international currency. This inclusion of the renminbi has been one of the most important adjustments in IMF’s SDR weighting ever since SDR was established. In it there is not only the “symbolic” meaning, but also the recognition of China’s rising status in global economy and financial market. It is the win-win strategic choice for the benefits of both China and the world. Being included in the SDR basket, the RMB will take some responsibilities that were previously assumed by the US dollar, the euro, and other currencies. The decrease in the weighting of US dollar and the euro helps release the pressure of the appreciation of the US dollar, and it also has a beneficial effect in the recovery of manufacturing in the western developed countries.

Secondly, IMF’s inclusion of the renminbi will advance the internationalization of the Chinese currency, promote the reform of the Chinese financial system, reduce the risk of China’s foreign trade, broaden the horizon of China’s foreign investment, and facilitate the international consumption of Chinese nationals, all of which would greatly boost the recovery of the global economy. Besides, this inclusion indicates that the RMB, the Chinese financial market and even the Chinese financial system will push themselves earnestly to meet the higher international standards, so that the financial reform and the opening-up of the financial market in China will be accelerated in a better and faster vein and China and the whole world will get powerful financial supports for the healthy and sustainable development of the economy.

Thirdly, the RMB’s being included in the SDR Basket will provide the countries and investors around the world with more diverse choices in assets allocation. It will help China to reach the breakthrough over the RMB’s multilateral use and its use in international investment and financing, cross-border assets allocation, and international monetary system. After this inclusion, the RMB assets in the currency swap agreements signed by China and its Asian trading partners will be seen as the official reserve, so the use of the RMB in Asia will be in continuous expansion, which plays a significant role for the financial system both in Asia and around the world and strengthens the spillover effect of the Asian economies. One apparent impact of the inclusion of the RMB is that, the central banks and private investors around the world will increase the RMB assets in the allocation. Up to now, the currencies included in SDR “Basket” account for 82.6% in the allocation of foreign exchange reserve within each country’s central bank, with the Non-SDR currencies accounting for merely 6.7%. After the RMB’s being into the “Basket”, the 188 member states in IMF will therefore include the RMB into their reserve assets, so there is tremendous space for future development.

Finally, the inclusion of the RMB will enhance SDR’s representativeness and attractiveness as the international reserve assets, optimize the current international monetary system, reduce the over reliance on the present limited number of reserve currencies, strengthen the international society’s ability to deal with crises and maintain the stability of the international monetary and financial system, as well as promote the justice and fairness in the global financial and economic governance system. SDR currencies have the characteristics and potential to become the supranational reserve currencies. The range of using SDR should be extended in the future and in this way each country’s need of reserve currencies can be satisfied in a real sense. The inclusion of the RMB will pave the way for SDR to become the supranational currencies and to play a better role in the global financial system.

(The author is a commentator in People’s Daily, head of Research Institute of Finance and Economics, and professor in the School of Economics and Management at Tongji University. This article originally appeared in https://paper.people.com.cn/rmrbhwb/html/2015-12/02/content_1637777.htm)