LONDON, Nov. 20 (Xinhua) -- The International Monetary Fund's decision to recommend that the Chinese currency the renminbi become one of an exclusive set of currencies that are part of the Special Drawing Rights (SDR) basket is more than symbolic.
The IMF's managing director Christine Lagarde backed the move last week, opening the way for the IMF executive board to place the renminbi in the SDR grouping at its meeting at the end of the month alongside the U.S. dollar, euro, pound, and yen.
David Marsh, managing director of the Official Monetary and Financial Institutions Forum (OMFIF), told Xinhua that it was a sign of China's rising status, and presaged a lengthy period of readjustment among reserve currencies.
"It shows the way that China has come up through the ranks of developing countries and is challenging the major players in this exclusive club of reserve currency countries for the first time," he said.
Marsh added: "It shows that this club of four countries is being extended in a very serious way and it shows that asset managers and central bank reserve holders all over the world will now have an incentive over the next few years to move some of their balances to the renminbi."
Mark Boleat, policy chairman at the City of London Corporation, also believed that if the renminbi entered the SDR basket it would be a symbol of its status and of its current and future importance.
He said: "It is an indication that the currency is already very important in the world and it is going to become more important. So, symbolically it is important, but it is not just a symbol; it is a recognition, and also it will undoubtedly increase the willingness of central banks and others to hold and to deal in renminbi."
The City of London Corporation, which is home to much of the financial services industry that makes London a global financial hub, has been working hard over the past few years to develop the city as a center for renminbi trading, and the SDR move is in his view "absolutely right. We fully support it."
He added: "If you go back a few years ago, people hardly talked about the Chinese currency, but there has been a lot of publicity about what has happened, this included. So it is giving confidence about the nature of the currency that it is internationally tradable, that it is going to be used more and more, not just in trade but in investment. So it is a mixture of competence and reputation."
Boleat saw the move as part of the internationalization of the renminbi.
"The currency is being internationalized bit by bit. It gives their currency due recognition but it also very much confirms that they want their currency to be used internationally, to be traded internationally."
For Marsh, SDR status is an indication of a long-term trend that is likely to see the renminbi develop, perhaps into the main reserve currency.