Update | Managed float to continue for Chinese yuan despite milestone IMF decision

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Transition towards a free float will be a gradual, long-term process, says deputy central banker Yi Gang on yuan’s accession into IMF elite

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International Monetary Fund (IMF) Managing Director Christine Lagarde delivering a statement on the conclusion of the IMF's Executive Board regular five-yearly review of the Special Drawing Rights (SDR) at the IMF Headquarters in Washington, DC where they announced the addition of the Chinese currency, the yuan, to the SDR basket. Photo: EPA

Jing Yang

Published: 8:45pm, 1 Dec 2015Updated: 11:46pm, 1 Dec 2015

Mainland China’s central bank has moved to assuage concerns that depreciation of the Chinese yuan is in the cards in the wake of a milestone decision by the International Monetary Fund to give the currency reserve status recognition.

People’s Bank of China deputy governor Yi Gang told reporters on Tuesday （that the current controlled float exchange regime will continue, while pledging to transition towards a “clean float”, or a free float mechanism in the future.

“Our long-term goal is a clean float, which entails little intervention. But under the current managed float mechanism, we have to intervene at times to stabilise the market,” Yi said.

The IMF on Monday approved the yuan, also known as the renminbi, to be the fifth currency after the US dollar, Euro, British pound and Japanese yen in the SDR basket, a quasi-currency that functions as an accounting unit of the IMF, as well as claims and denomination of IMF credits to member countries.

The verdict is seen as an acknowledgement of China’s heft in the global economy, and will give top brass in Beijing further incentive to press ahead with financial and capital account liberalisation.