World Bank approves China to issue SDR’s as the RMB continues to grow in global use

A few weeks ago, the IMF entered into an agreement with China to allow the Asian power to begin financializing M SDR bonds once an audit was completed regarding their reserves and banking system.  And on Aug. 12, the World Bank publicly gave their approval as well to China, which in the coming months will be the sole authority in issuing M SDR denominated bonds for use in international settlement.

Underlying the significance of this new program is that two Western financial entities are providing tacit approval to China rather than the United States, and are entering into the first major step towards ending the polar global reserve currency system that has been prevalent in the world since the Bretton Woods agreement of 1946.

China’s central bank said Friday that it has approved a World Bank unit to issue bonds denominated in special drawing rights (SDR) in the country’s interbank bond market.

The International Bank for Reconstruction and Development was approved to issue 2 billion SDR (2.79 billion U.S. dollars) of bonds, the People’s Bank of China said in a statement on its website. Chinese yuan will be the currency of the settlement.

The first batch of bonds will be put on the market soon, said the statement, though a detailed schedule was not provided.

The inclusion of yuan in the IMF’s reserve currency basket, known as the SDR, will take effect in October.

— People.CN

In addition to China soon becoming the caretaker of SDR internationalization and distribution, the Chinese central bank also reported this week that use of their currency has increased in one year by over 21% in cross-border settlement.  This means that the use of the RMB more than the dollar is becoming the preferred currency for direct bi-lateral trade.

Chinese currency is increasingly being accepted in cross-border transactions, as the currency gains increased global recognition, a central bank report said Wednesday.

In 2015, the volume of cross-border renminbi receipts and payment reached 12.1 trillion yuan ($1.83 trillion ), an increase of 21.7 percent year on year, according to data released by the People’s Bank of China (PBOC).

It accounts for nearly one third of the total volume of cross-border receipts and payments.
China has aggressively promoted global use of the renminbi, as the world’s largest trading nation looks to lower transaction costs in international trade, which currently is mostly settled in US dollars.

— China Daily

Over the past two years, China has said explicitly that they do not wish to supplant the dollar and become caretakers to a singular global reserve currency, but rather to incorporate a basket of currencies to act in this position.  And interestingly enough, their acceptance into the IMF’s SDR program while also being given the authority to administer and propagate it globally, shows just how far China has grown in being recognized as the future manager over global finance.

Right now, China owns several of the world’s largest banks, including the number one spot with the Industrial and Commercial Bank of China (ICBC).  In addition, they are the world’s largest industrial economy which makes them a perfect candidate to manage the next reserve currency instrument and expand its use across the globe.

As we know from China historically, these new steps are just the beginning of a much grander overall plan, which one day will see the RMB, the SDR, and all global trade become one where letters of credit are once again are undertaken through a new form of a gold standard.

10 comments

  1. did the IMF and World Bank make their decisions independent of the US?????/
    I am under the impression the US controls / has final say of those organizations.

  2. @Jane Doe –

    Something the US doesnt talk about much… it has been the Chinese who have funded the IMF in recent years, with the US supplying them very little capital.

    He who owns the gold makes the rules.

  3. I had heard that about China..how does it work with the World Bank or are they not really important here compared to the IMF…
    does the Chinese doing the funding mean the US has no say?
    what are the chances before war with either Russia or China, China and/or Russia
    will do something like issue a gold backed currency in order to avoid war?
    thanks

  4. Ken,

    If China were to issue SDR bonds that pays interest, wouldn’t that blow up the Treasury Bond market? How likely is that?

  5. To Jane Doe below. The US did have total control over the IMF by the executives at the bank outsourcing a lot of the actual work and decisions thru outside committees all controlled by US interests. China now head the board that oversees the IMF. In 2010 after the financial crisis caused by wall street all IMF members, (except the US) voted to move the international financial community away from a uni-polar dollar denominated world to a multi-polar one where the SDR and other countries currencies would be used more to settle international trade. Currently central banks have been buying gold and depositing some it with the IMF in exchange for SDRs. Recent examples are both China and Russia. All countries now have SDRs as part of their official reserves. On 10/1/2016 when the yuan is added to the basket of currencies backing the SDR, countries will be able to exchange a portion of their dollars, treasuries and their own government debt in exchange for SDRs. The goal is not to replace the dollar entirely has most countries have dollar based assets so it is in their best interest not to allow it or treasuries to collapse. China alone has over $1 trillion in dollars, treasuries and other US gov. agency debt. The IMF and the BIS will be responsible for soaking up the excess dollars and treasuries in the international system holding the debt until maturity so as not to cause these to collapse. Now the IMF will not manage the daily management of the SDR conversions but the BIS in Basel, Switzerland. Do you see the power shift going on? The BRICSA countries currently settle trade with each other currencies and come October will use the SDR to settle trade with the west and where China has currency swap agreements it is now settling trade with each other currencies. They have these agreements with the EU, Germany, Hungary, Canada, Australia, New Zealand, Turkey, Syria and a host of the "stans" countries just to name a few. This is all common knowledge outside the US and has been in the works since 2010. All the information is published by the IMF, the BIS and PBOC. The net here in the US is just starting to publish this but again it is all been in process and well known since 2010. The best info site here is philosophyofmetrics.com and the owner is JJ Collins who is not only an expert on the changes coming but on the SDR and what is happening in the international community. He has been writing about this for years and everything he has stated in the past came true or is coming true!

  6. SDR’s are can kickers, more debt repackaged with a new name. Don’t get suckered.

    Gold backed currency rocks ! Now that gold trades in real-time (floating USD/oz) , the market is free to create finished gold and use it for market currency payments and transfers right from the grass roots and right from your PC or transaction card. This empowers consumers all over the world in a bottom-up effort to stimulate trade (debt-free) while also allowing debt based fiat currency to be purged.

    In the meantime, we’ll see more can kickers in the waiting game for critical mass.

    Support debt-free gold-as-currency. It’s a market process now.

    Goldmoney.com/r/0UZxqF

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