The International Monetary Fund (IMF) has announced that China’s currency, the yuan, has got IMF reserve status and it will join the fund’s basket of reserve currencies.
Currently just the US dollar, the euro, the yen and the pound are in the group.
The IMF said the yuan “met all existing criteria” and should become part of the basket in October 2016.
IMF chief Christine Lagarde said it was “an important milestone in the integration of the Chinese economy into the global financial system”.
She added it was also a recognition of the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems.
The yuan will now make up part of the IMF’s Special Drawing Rights (SDR) – an asset created by the IMF which serves almost as a currency.
It is used for transactions between central banks and the IMF, and is used to decide the currency mix that countries like Greece, for example, receive when the IMF provides financial aid.
The last change made to the basket was in 2000, when the euro replaced the German mark and the franc.
China is the world’s second largest economy behind the US and asked for the yuan to become a reserve currency last year.