Yuan's inclusion in IMF's currency basket faces economic, political hurdles
Observers say the decision will be politically sensitive amid growing concern from the West about Beijing's rising power
The International Monetary Fund's finding that the yuan is no longer undervalued would appear to boost its chances of inclusion in the agency's Special Drawing Rights basket, but analysts caution that politics, as well as economics, will weigh heavily on any such decision.
Despite the yuan's leading share in world trade, controversies remain over whether it fits the IMF's criteria of being "freely usable".
And observers say the decision will be politically sensitive amid growing concern from the West about Beijing's rising power.
The IMF said on Tuesday that the yuan was no longer undervalued after substantial appreciation over the past year. But it urged Beijing to make the exchange rate more flexible.
In a review in October, IMF board members will decide on whether the yuan should be added to the SDR basket, which is now made up of the US dollar, the sterling, the yen and the euro.
"In the end, this year's decision about the SDR basket will be made on political as much as on economic grounds, which means it will be determined by the governments with the most influence at the IMF, including the US," said Capital Economics' Andrew Kenningham.
Chinese leaders have expressed desire for the yuan to be added into SDR this year. But Washington's concern about losing dominance in the global order has grown, observers say, particularly after many of its allies joined the Beijing-led Asian Infrastructure Investment Bank.
