Small step for money, big leap for monetary system

THE renminbi's entry into the Special Drawing Right (SDR) represents the first time that a currency of a developing country becomes a de jure reserve asset - official recognition of a momentous shift in the global power balance. The SDR is the International Monetary Fund's (IMF) artificial composite currency unit, part of the glue that binds world finance, but with no real role on international markets. This is a small step for money - but a giant leap for the monetary system.

The IMF's ruling, backed on Monday by its executive board in Washington, that the renminbi is "freely usable" and thus can be included in the SDR from next October - despite the persistence of some Chinese capital controls - has geopolitical implications. Acquiescence by the US in this landmark move is recognition that China's march to the top table of the world economy is unstoppable. Yet, confirmation of a multi-currency reserve system -…