IMF to decide on yuan's inclusion in currency basket

China's foreign exchange regulator is cooperating with officials from the International Monetary Fund on assessing whether the yuan is qualified to join the Special Drawing Rights basket, a State Administration of Foreign Exchange spokesman said on Wednesday.

A team from the IMF arrived in Beijing at the weekend to start technical discussions with the central bank to evaluate the yuan's usage in global trade and its convertibility.

"China is actively trying to join the SDR but it should be a natural process that requires all conditions to be right," said Wang Yungui, director of policy and regulations department at SAFE.

"Joining the SDR basket is crucial to accelerate the yuan's internationalization process and reduce potential financial risks."

The SDR basket, an international reserve asset created in 1969, is reviewed every five years. It currently includes the US dollar, Japanese yen, British pound and the euro.

An informal board meeting is due to be held in the middle of the year with the formal review to take place by the end of December.

The two-stage review process consists of a technical determination of whether the yuan meets SDR criteria, and then a vote by the IMF Executive Board.

The yuan failed the review for SDR inclusion in 2010 as it was not considered 'freely usable'. The political backdrop at the time was negative for China as the US claimed the currency was "substantially undervalued" and should be allowed to appreciate.