China adopts IMF accounting practice in push for reserve currency status for yuan

An employee counting Renminbi (RMB) banknotes at a branch of Bank of China in Changzhi, Shanxi province. -- PHOTO: REUTERS 
An employee counting Renminbi (RMB) banknotes at a branch of Bank of China in Changzhi, Shanxi province. -- PHOTO: REUTERS 

HONG KONG (Bloomberg) - China adopted the International Monetary Fund's standards for its latest balance of payments data as the nation seeks to obtain reserve-currency status for the yuan.

The changes, effective this year, include putting reserve assets under the financial rather than the current account, according to a statement posted on the State Administration of Foreign Exchange website on Tuesday.

With the adjustment, the country's first-quarter current-account surplus of US$78.9 billion is the same as the deficit under the financial and capital heads. The authority didn't give a reason for the shift.

People's Bank of China officials have called for the IMF to include the yuan in the institution's basket of reserve currencies, and adopting global accounting norms will support its case before a review later this year. The yuan failed to quality in 2010 as it wasn't judged to be "freely usable" in trade and finance.

"Adjusting to international standards is essential as China wants the yuan to be a reserve currency," said Daniel Chan, analyst at Brilliant & Bright Investment Consultancy Ltd. in Hong Kong.

China is making the yuan more freely usable in order to be included in the IMF's Special Drawing Rights basket, PBOC Governor Zhou Xiaochuan said in Washington on April 18. The yuan reclaimed fifth place in global payments last month, according to the Society for Worldwide Interbank Financial Telecommunication.

China's foreign-exchange reserves slid the most on record in the three months through March, fueling speculation the monetary authority sold holdings to support the yuan. The stockpile shrank US$113 billion to US$3.73 trillion in a third straight quarterly decline, central bank data show. Yuan positions on the PBOC's balance sheet, a barometer of capital flows, slid a record 252.1 billion yuan. The yuan, which has gained 0.6 per cent in the past three months, was little changed at 6.2093 a US dollar in Shanghai on Tuesday.

Overhauling the balance-of-payments calculation will also allow a better gauge of China's capital flows at a time when money is leaving the nation, said Brilliant & Bright's Chan.