Chinese Yuan’s Ascent to Global Reserve Status: A Timeline
(Bloomberg) -- The yuan became one of five global reserve currencies on Saturday, the culmination of several years of efforts by Chinese policy makers to gain such recognition.
Its entry into the International Monetary Fund’s Special Drawing Rights -- alongside the dollar, euro, pound and the yen -- will help further China’s efforts to boost international usage of the yuan at a time when the currency’s share of global payments is hovering near a two-year low. While China has come under criticism for manipulating its exchange rate, IMF Managing Director Christine Lagarde said early September that the nation is on an irreversible path toward opening up and playing the “economic game by the rules.”
Here’s a look at key events for the yuan -- also known as the renminbi, which means "the people’s currency” -- over the past seven decades:
Oct. 1: The yuan is admitted into the IMF’s Special Drawing Rights with a weighting of 10.92 percent, compared with the dollar’s 41.73 percent and the yen’s 8.33 percent.
July 21: Yuan’s share of global payments shrinks to 1.72 percent in June, the lowest since 2014, according to the Society for Worldwide Interbank Financial Telecommunications. The ratio was 1.86 percent in August.
May 26: China sells sovereign bonds in London in the nation’s first offshore issuance outside of Hong Kong. This follows the PBOC’s offering of one-year bills in London in October 2015.
Jan 8: China ends an eight-day run of reductions to the yuan’s reference rate that sent shockwaves through financial markets and escalated fears of a global currency war. This comes a day after official data showed central bank support for the yuan led to a record $108 billion tumble in the nation’s foreign-exchange reserves in December.
Jan 4: Extension of yuan trading hours comes into effect, with onshore business closing at 11:30 p.m. rather than 4:30 p.m. The move is aimed at providing a reference for the daily calculation of the value of the IMF’s SDR.
Dec. 11: China unveils an index of its exchange rates versus the currencies of 13 trading partners and says the yuan shouldn’t be measured against the dollar alone. The official gauge, released every Friday, can be found though this link, while a Bloomberg replica that is updated daily is here.
Nov. 30: The IMF’s executive board, which represents the fund’s 188 member nations, decides the yuan meets the standard of being “freely usable” and will join the Special Drawing Rights basket on Oct. 1, 2016.
Sept. 25: After a meeting between presidents Barack Obama and Xi Jinping, the two sides issue a statement saying the U.S. supports the inclusion of the yuan, “provided the currency meets the IMF’s existing criteria in its SDR review.”
Sept. 10: PBOC says it will allow foreign central banks, sovereign wealth funds to enter onshore currency market.
Aug. 11: PBOC devalues the yuan by weakening its daily fixing by a record 1.9 percent, sparking the biggest selloff since 1994. A new method to determine the reference rate is introduced, with market makers who submit contributing prices being told to consider the previous day’s close, foreign-exchange demand and supply, as well as changes in major exchange rates.
Aug. 4: The IMF says more work is needed before the yuan can be granted SDR status. Staff propose that implementation of any changes to the basket be delayed until the end of September 2016.
Nov. 17: A trading link between the Hong Kong and Shanghai stock exchanges begins, allowing 23.5 billion yuan ($3.5 billion) of daily cross-border transactions. Hong Kong also removes a yuan conversion limit on its residents.
Sept. 30: Direct trading between the yuan and the euro begins in China’s interbank foreign-exchange market.
June 19: Direct trading starts between the yuan and the pound.
March 17: China expands the yuan’s trading band to 2 percent from 1 percent.
July 12: China increases Qualified Foreign Institutional Investor program quotas to $150 billion from $80 billion and expands Renminbi QFII beyond Hong Kong to include cities such as Singapore and London.
April 14: China widens the yuan’s trading band to 1 percent from 0.5 percent in the first such move since 2007.
Dec. 16: Starts trial for the Renminbi QFII program, allowing some overseas fund-management and securities firms to invest their yuan onshore.
Aug. 17: China announces a pilot program to let overseas financial institutions invest yuan in the interbank bond market. It starts with foreign central banks, clearing banks for cross-border yuan settlement in Hong Kong and Macau, and other international lenders involved in trade settlement.
June 19: China’s central bank pledges to “increase the renminbi’s exchange-rate flexibility” without indicating a timeframe. It rules out a one-time revaluation.
May 25: Then-President Hu Jintao, speaking at the U.S.-China Strategic & Economic Dialogue in Beijing, pledges to “steadily advance” toward yuan reform.
May 18: The central bank widens the yuan’s trading band, allowing the currency to move as much as 0.5 percent on either side of a daily reference rate against the dollar. The previous limit was 0.3 percent.
July 21: China ends the yuan’s decade-old peg to the dollar and says it will let the renminbi fluctuate against a basket of currencies. It allows the yuan to strengthen 2.1 percent to 8.11 a dollar immediately.
Feb. 3: U.S. Senators Charles Schumer and Lindsey Graham call for legislation to impose a 27.5 percent tariff on Chinese imports unless yuan controls are eased.
Oct. 1: PBOC Governor Zhou Xiaochuan and Finance Minister Jin Renqing meet finance ministers from the Group of Seven industrialized nations in Washington. This is the first time China, now the world’s seventh-largest economy, has been formally invited to take part in a G7 meeting.
May: The U.S. government calls on China to revalue or float the yuan after some American manufacturers complained an undervalued currency was giving Chinese rivals an unfair advantage.
Nov. 7: China’s stock market regulator issues rules allowing foreign investment in the country’s yuan-denominated A-shares under QFII.
March 28: Then-PBOC Governor Dai Xianglong says China is considering an IMF proposal to link the yuan to a basket of currencies rather than just the U.S. dollar.
Countries including the U.S. and Japan urge China not to devalue the yuan during the Asian financial crisis, fearing it could trigger a chain reaction.
December: China allows foreign banks in Shanghai’s Pudong district to execute renminbi transactions. It also allows the yuan to be freely convertible under the current account.
June: The effective start of a yuan peg that keeps the exchange rate at about 8.30 per dollar for a decade.
April 18: China Foreign Exchange Trading System is set up in Shanghai to allow trading and settlement of the yuan against the dollar, yen and Hong Kong dollar. Trading is allowed for current-account purposes only.
Jan. 1: China unifies the official and market exchange rates at 8.70 yuan a dollar under a “floating exchange-rate system.” This effectively devalues the yuan’s official rate by 40 percent. Foreign Exchange Certificates are phased out.
November: Communist Party Central Committee issues a document setting a long-term objective of a floating exchange-rate regime and full convertibility of the yuan.
Nov. 17: The official exchange rate is adjusted to 5.22 yuan a dollar.
Jan. 1: China’s dual exchange rates are unified at 2.8 yuan a dollar.
January: China sets a settlement price for the yuan for foreign-trade purposes at 2.8 yuan to the dollar to encourage exports. For non-trade purposes, the official exchange rate is 1.5 yuan.
April 1: Foreign Exchange Certificates are issued as a currency for use only by foreigners. The official exchange rate is one FEC for one yuan.
March: The State Administration of Foreign Exchange is established to oversee currency-control measures. Bank of China is the appointed foreign-exchange bank.
December: China launches its reform and opening policy under Deng Xiaoping.
Dec. 1: The first renminbi notes are issued by the Communist Party before it takes power on the mainland on Oct. 1, 1949. The People’s Bank of China is formed.
With assistance from Robin Ganguly, Karen Zhang, Helen Sun