CNY's inclusion in SDR, what is in it for China?

The International Monetary Fund(IMF) wants to keep the composition of the SDR basket intact, which is always debated amongst economists. This is likely the reason why it took Chinese Yuan late till September 2016 in order to be considered to be included in the 'reserve currency' basket.

China had already met the exports criterion( the total of last five years exports have to be of largest value) back in 2010 itself, but it waited to meet the 'freely usable currency' criteria. However it is widely opined that the near term implications for CNY by becoming 'reserve currency' are limited, with an improvement of its liquidity conditionally.

This is because, although if CNY becomes more liquid if central banks buy it as a reserve asset, the automatic buying annd selling would not be having much scope. Even the medium and longer term implications are unlikely to be significant enough, however.

"Getting reserve currency status down the road could help the China to gradually become a regional safe haven and lower borrowing costs in international financial markets. It might even mitigate capital outflows in case of external shocks", says Nordea Bank.