Seven things you need to know about yuan's inclusion in SDR basket

Chinese yuan or renminbi (RMB) has been included into the basket of special drawing right (SDR) of the International Monetary Fund (IMF) since Oct 1, marking a milestone in the internationalization of the RMB. Here are seven things you need to know about the addition of RMB to the SDR.

What is the role of the SDR?

A photo shows five major currencies in the basket of SDR. [Photo/VCG]

The SDR was created by the IMF in 1969 as a supplementary international reserve asset, in the context of the Bretton Woods fixed exchange rate system.

As the Bretton Woods system collapsed and the major currencies shifted to floating exchange rate regimes, the reliance on the SDR as a global reserve asset lessened. However, the SDR allocation totaling SDR 182.6 billion in 2009 played a critical role in providing liquidity to the global economic system and supplementing member countries' official reserves amid the global financial crisis.

In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations.