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Tuesday, September 08, 2009

China is trying very hard to diversify away from US dollar

There is not much China can do, but purchasing IMF notes is a good away to increase its influence on international monetary policy.

The Managing Director of the International Monetary Fund (IMF), Mr. Dominique Strauss-Kahn, and the Deputy Governor of the People's Bank of China, Mr. Yi Gang, have signed an agreement under which the People's Bank of China would purchase up to SDR 32 billion (around US$50 billion) in IMF notes.

The note purchase agreement is the first in the history of the Fund, and follows the endorsement by the Executive Board on July 1, 2009 of the framework for issuing notes to the official sector. The Chinese authorities had expressed their intention to invest up to US$50 billion in IMF notes in June (see Press Releases No. 09/204 and No. 09/248).

The agreement offers China a safe investment instrument. It will also boost the Fund's capacity to help its membership — particularly the developing and emerging market countries — weather the global financial crisis, and facilitate an early recovery of the global economy.