IMF decided to include China's currency RMB in SDR Basket on Monday, November 30, 2015 [Photo:blog.sina.com.cn]

The International Monetary Fund has officially announced that the Chinese currency is eligible for joining the Special Drawing Rights basket as an international reserve currency.

Experts believe the move indicates global recognition of the Chinese currency, and hope it will promote a stronger real economy.

Our Washington correspondent He Fei has more details.

Reporter:

"The IMF's executive board decided that the renminbi qualified for the SDR basket and existing criteria."

Christine Lagarde, managing director of the IMF, made the announcement in Washington.

Lagarde says the decision is an important milestone in the integration of the Chinese economy into the global financial system.

"The addition and the inclusion of the renminbi in the SDR basket of currencies is a recognition of the significant reforms which have been conducted, of the significant opening up of the Chinese economy, of the financial, more market-driven principles that are being used by the Chinese authorities going forward. That is clearly symbolic in a way of all those reforms, which is why I associated the renminbi inclusion with the reforms conducted and to be continued."

According to IMF, the RMB will have a weighting of 10.92 percent in the new SDR basket, while the respective weighting of other currencies in the basket are 41.73 percent for the U.S. dollar, 30.93 percent for euro, 8.33 percent for the Japanese yen and 8.09 percent for the British pound.

Tan Yaling, Head of China Forex Investment Research Institute, believes the move is a recognition of Chinese currency in the international society.

“After the inclusion to SDR, RMB can be used for settlements among central banks. It's good to improve its international standings and we should seek this opportunity to strengthen our real economy."

RMB was rejected into the inclusion of SDR five years ago on the basis of not "freely usable".

During the past five years, Chinese authorities have undertaken a series of reforms, such as improving its foreign exchange rate formation system, and opening up its interbank bond and forex markets.

According to the Society for Worldwide Interbank Financial Telecommunication, renminbi now ranks fifth as a global payments currency and seventh as a global reserve currency.

Huang Yiping, an adviser to China's central bank, explained how the inclusion will affect people's lives in the future.

"That RMB being included in the SDR basket means that it is now one of the most important currencies globally. It is a great push in making the RMB truly international, and encouraging individuals and organizations of all countries in the world to hold it as well as invest it,"

Huang adds that the inclusion of the RMB into the SDR also reduces the exchange rate risks of financing, and lowers the trade costs when Chinese people shop abroad

The IMF's Special Drawing Rights basket is a type of international reserve asset that IMF members can turn to in times of need.

The basket is currently made up of the US dollar, the euro, the British Pound and the Japanese Yen.

It's composition is reviewed every five years.

The inclusion of the RMB will take effect Oct. 1, 2016.

For CRI, this is He Fei from Washington.