Gains from yuan inclusion in SDR not so clear-cut

Taipei

THE yuan's coronation as the International Monetary Fund's fifth designated reserve currency will be either worth more than US$1 trillion in fund inflows or little more than symbolic, depending on how quickly China opens its markets.

The IMF will need to conclude that the currency is "freely usable" for it to win entry in a review of the Special Drawing Rights basket this month. Standard Chartered Plc predicts that the endorsement would draw between four trillion yuan (S$892 billion) and seven trillion yuan of funds over five years, up to half of which will come from reserve managers and the rest from private investors.

Daiwa Capital Markets says that, until reforms make more progress, entry will be "almost irrelevant". Fund managers may favour currencies such as the Swiss franc and the Aussie dollar until China lifts capi…