On November 30, 2015 (October 19, 2015 in the lunar calendar), the RMB was included in the Special Drawing Rights (SDR) currency basket. Internationalization of RMB On December 30, 2015 (early morning of December 1, Beijing time), the International Monetary Fund (IMF) announced that the RMB will be included in the SDR(Special Drawing Rights) currency basket and will officially take effect on October 1, 2016., become a freely usable currency. IMF document information The IMF document information shows that the RMB accounts for 10.92% of the SDR, the US dollar accounts for 41.73%, the euro accounts for 30.93%, the Japanese yen accounts for 8.33%, and the British pound accounts for 8.09%. The RMB accounts for more than the Japanese yen and the British pound in the SDR, second only to the US dollar and the euro. The successful inclusion of the Special Drawing Rights (SDR) currency basket in the SDR currency basket is a milestone on the road to RMB internationalization. However, many analysts pointed out that the internationalization of the RMB is a matter of degree and cannot be simply measured by yes or not. For the RMB, joining the SDR is a new starting point on the road to internationalization. RMB Internationalization What is internationalization? According to Zhu Haibin, chief economist at JPMorgan Chase China, the internationalization of a currency must fully realize the three functions of the currency: settlement function, investment function and reserve currency function. The measurement of the internationalization of the RMB is also inseparable from these three dimensions: the amount of RMB settlement in international trade; the amount of financial investment products denominated in RMB, and the amount of RMB used as a reserve currency among central banks of various countries. Data from the World Fund (IMF) shows that from 2010 to 2014, China's exports accounted for 10.6% of global exports, which is only lower than the share of the euro zone (18.2%) and the United States (13.6%). In recent years, the China government is also gradually promoting RMB capital account convertibility and building offshore RMB trading centers in Hong Kong, London and other places, in an attempt to enrich RMB overseas investment options. However, analysts pointed out that the current investment channels for overseas RMB holders are still very narrow. According to IMF data, as of the end of 2014, the RMB's share of global foreign exchange reserves was 1.1%. It can be seen from the measurement of RMB internationalization that this process brings substantial benefits in three aspects: First, for domestic traders, using RMB to settle can avoid exchange rate risks. Although there are currently abundant foreign exchange derivatives in the country that can be used as hedging tools, the use of these tools means an increase in transaction costs. Second, the abundance of RMB investment products can increase business opportunities for domestic financial institutions and promote the development of the financial industry. Third, the function of reserve currency can help China increase seigniorage tax. Challenges after joining the SDR The RMB successfully joined the SDR shows the phased recognition of the internationalization of the RMB by the International Monetary Fund and the international community. However, as general analysis in the industry has said, this incident is of greater symbolic significance, and the process of RMB internationalization needs to continue to advance. At present, in cross-border trade, trading countries that use RMB to settle are more concentrated in relatively backward neighboring countries. "The key to RMB internationalization is to cultivate internal strength, accelerate domestic reforms, and promote enterprises to improve the international competitiveness of their products. "he said. China also needs to establish a RMB capital market that has depth and can be widely invested, and the pace of financial reform cannot stop. What impact does the entry of RMB into the basket have on people's lives? After RMB joins the SDR, what impact will it have on ordinary people? Experts said that in the long run, in the future, our people will be able to directly use RMB to travel, shop, and invest overseas, reducing exchange costs and avoiding currency risks. The RMB's accession to the SRD will enhance the RMB's status as a reserve currency, especially against the background of strong expectations of a US dollar interest rate hike, helping the RMB in the hands of ordinary people in our country to strengthen and reduce concerns about potential shrinkage. From a consumption perspective, due to the expansion of RMB pricing functions, many bulk commodities are denominated in RMB, which will avoid the risk of exchange rate fluctuations and reduce purchase costs. At major tourist spots around the market, the exchange of RMB and foreign currencies will also become more convenient. There is no longer a need to exchange foreign currencies and you can travel abroad with RMB. When shopping, you can use RMB directly for settlement, and there will be no longer any trouble caused by exchange rate changes in previous interbank foreign exchange settlement. Maintaining a stable RMB will also help investors allocate and trade assets around the world. In the future, China can more easily allocate overseas assets. Buying real estate, stocks and creditor's rights abroad, and directly taking RMB to buy a house abroad will no longer be a dream. Background information: What is SDR? Birth: In 1969, the International Monetary Fund (IMF) first proposed the concept of SDR(Special Drawing Rights). SDR is a supplement to reserve assets available to member countries in addition to the "General Drawing Rights". Purpose: The IMF allocates SDR based on the proportion of each member state's contribution shares. When a balance of payments deficit occurs, SDR holders can use quotas to exchange foreign exchange from other member states designated by the IMF to repay the balance of payments deficit or repay IMF loans and pay interest, and can also serve as international reserves like gold and freely convertible currencies. Evaluation year: The IMF evaluates the SDR basket currencies every five years, including adjusting the weights of currencies in the basket and considering whether to include other currencies. Since 1999, the currencies of the SDR basket have been the US dollar (48.2%), the euro (32.7%), the British pound (11.8%) and the Japanese yen (7.3%). 2015 is a "evaluation year". The IMF's formal evaluation is carried out in October. The specific operation is divided into two steps. The first is to screen the currencies that meet the requirements, and the second is to confirm the weights of various selected currencies.